Correlation Between Mega Lifesciences and Thai Union

Can any of the company-specific risk be diversified away by investing in both Mega Lifesciences and Thai Union 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 Thai Union 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 Thai Union Group, you can compare the effects of market volatilities on Mega Lifesciences and Thai Union 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 Thai Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mega Lifesciences and Thai Union.

Diversification Opportunities for Mega Lifesciences and Thai Union

0.28

Correlation Coefficient

Mega Lifesciences  Thai Union

Modest diversification

The 3 months correlation between Mega and Thai is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Mega Lifesciences Public and Thai Union Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Union Group 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 Thai Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Union Group has no effect on the direction of Mega Lifesciences i.e., Mega Lifesciences and Thai Union go up and down completely randomly.

Pair Corralation between Mega Lifesciences and Thai Union

Assuming the 90 days trading horizon Mega Lifesciences Public is expected to under-perform the Thai Union. But the stock apears to be less risky and, when comparing its historical volatility, Mega Lifesciences Public is 70.49 times less risky than Thai Union. The stock trades about -0.05 of its potential returns per unit of risk. The Thai Union Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,570  in Thai Union Group on August 31, 2024 and sell it today you would lose (220.00) from holding Thai Union Group or give up 14.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Mega Lifesciences Public  vs.  Thai Union Group

Mega Lifesciences Public

Risk-Adjusted Performance

0 of 100

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Thai Union Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Union Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Thai Union disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mega Lifesciences and Thai Union

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

The idea behind Mega Lifesciences Public and Thai Union Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .