Correlation Between Jollibee Foods and Megawide Construction

Can any of the company-specific risk be diversified away by investing in both Jollibee Foods 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 Jollibee Foods and Megawide Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jollibee Foods Corp and Megawide Construction Corp, you can compare the effects of market volatilities on Jollibee Foods 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 Jollibee Foods with a short position of Megawide Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jollibee Foods and Megawide Construction.

Diversification Opportunities for Jollibee Foods and Megawide Construction

0.13

Correlation Coefficient

Jollibee Foods  Megawide Construction

Average diversification

The 3 months correlation between Jollibee and Megawide is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Jollibee Foods Corp and Megawide Construction Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megawide Construction and Jollibee Foods 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 Jollibee Foods Corp 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 Jollibee Foods i.e., Jollibee Foods and Megawide Construction go up and down completely randomly.

Pair Corralation between Jollibee Foods and Megawide Construction

Assuming the 90 days trading horizon Jollibee Foods is expected to generate 1.44 times less return on investment than Megawide Construction. In addition to that, Jollibee Foods is 1.14 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 0.11 per unit of volatility. If you would invest  9,109  in Megawide Construction Corp on September 10, 2024 and sell it today you would earn a total of  441.00  from holding Megawide Construction Corp or generate 4.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

Jollibee Foods Corp  vs.  Megawide Construction Corp

Jollibee Foods Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jollibee Foods Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Jollibee Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Megawide Construction

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Megawide Construction Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Megawide Construction may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Jollibee Foods and Megawide Construction

The main advantage of trading using opposite Jollibee Foods and Megawide Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jollibee Foods 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 Jollibee Foods Corp 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.