Correlation Between Mega Lifesciences and Chin Huay

Can any of the company-specific risk be diversified away by investing in both Mega Lifesciences and Chin Huay 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 Mega Lifesciences and Chin Huay into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mega Lifesciences Public and Chin Huay PCL, you can compare the effects of market volatilities on Mega Lifesciences and Chin Huay 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 Mega Lifesciences with a short position of Chin Huay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mega Lifesciences and Chin Huay.

Diversification Opportunities for Mega Lifesciences and Chin Huay

0.54

Correlation Coefficient

Mega Lifesciences  Chin Huay

Very weak diversification

The 3 months correlation between Mega and Chin is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Mega Lifesciences Public and Chin Huay PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chin Huay PCL and Mega Lifesciences 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 Mega Lifesciences Public are associated (or correlated) with Chin Huay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chin Huay PCL has no effect on the direction of Mega Lifesciences i.e., Mega Lifesciences and Chin Huay go up and down completely randomly.

Pair Corralation between Mega Lifesciences and Chin Huay

Assuming the 90 days trading horizon Mega Lifesciences Public is expected to under-perform the Chin Huay. In addition to that, Mega Lifesciences is 1.87 times more volatile than Chin Huay PCL. It trades about -0.04 of its total potential returns per unit of risk. Chin Huay PCL is currently generating about -0.05 per unit of volatility. If you would invest  200.00  in Chin Huay PCL on December 1, 2024 and sell it today you would lose (7.00) from holding Chin Huay PCL or give up 3.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Mega Lifesciences Public  vs.  Chin Huay PCL

Mega Lifesciences Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mega Lifesciences Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Mega Lifesciences is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Chin Huay PCL

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chin Huay PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Chin Huay is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Mega Lifesciences and Chin Huay

The main advantage of trading using opposite Mega Lifesciences and Chin Huay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mega Lifesciences position performs unexpectedly, Chin Huay 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 Chin Huay will offset losses from the drop in Chin Huay's long position.

The idea behind Mega Lifesciences Public and Chin Huay PCL 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.