Correlation Between Alliance Select and Megawide Construction

Can any of the company-specific risk be diversified away by investing in both Alliance Select and Megawide Construction at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Alliance Select and Megawide Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alliance Select Foods and Megawide Construction Corp, you can compare the effects of market volatilities on Alliance Select and Megawide Construction and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Alliance Select with a short position of Megawide Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Select and Megawide Construction.

Diversification Opportunities for Alliance Select and Megawide Construction

-0.38

Correlation Coefficient

Alliance Select  Megawide Construction

Very good diversification

The 3 months correlation between Alliance and Megawide is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Select Foods and Megawide Construction Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megawide Construction and Alliance Select is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Alliance Select Foods are associated (or correlated) with Megawide Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megawide Construction has no effect on the direction of Alliance Select i.e., Alliance Select and Megawide Construction go up and down completely randomly.

Pair Corralation between Alliance Select and Megawide Construction

Assuming the 90 days trading horizon Alliance Select Foods is expected to under-perform the Megawide Construction. In addition to that, Alliance Select is 1.89 times more volatile than Megawide Construction Corp. It trades about -0.07 of its total potential returns per unit of risk. Megawide Construction Corp is currently generating about 0.14 per unit of volatility. If you would invest  8,966  in Megawide Construction Corp on September 6, 2024 and sell it today you would earn a total of  584.00  from holding Megawide Construction Corp or generate 6.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.97%
Values	Daily Returns

Alliance Select Foods  vs.  Megawide Construction Corp

Alliance Select Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Select Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Megawide Construction

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Megawide Construction Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Megawide Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alliance Select and Megawide Construction

The main advantage of trading using opposite Alliance Select and Megawide Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Select position performs unexpectedly, Megawide Construction can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Megawide Construction will offset losses from the drop in Megawide Construction's long position.

The idea behind Alliance Select Foods and Megawide Construction Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.