Correlation Between Megastar Foods and Entertainment Network

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

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

Diversification Opportunities for Megastar Foods and Entertainment Network

0.86

Correlation Coefficient

Megastar Foods  Entertainment Network

Very poor diversification

The 3 months correlation between Megastar and Entertainment is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Megastar Foods Limited and Entertainment Network Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entertainment Network and Megastar 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 Megastar Foods Limited are associated (or correlated) with Entertainment Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entertainment Network has no effect on the direction of Megastar Foods i.e., Megastar Foods and Entertainment Network go up and down completely randomly.

Pair Corralation between Megastar Foods and Entertainment Network

Assuming the 90 days trading horizon Megastar Foods is expected to generate 2.21 times less return on investment than Entertainment Network. But when comparing it to its historical volatility, Megastar Foods Limited is 1.12 times less risky than Entertainment Network. It trades about 0.02 of its potential returns per unit of risk. Entertainment Network Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  11,447  in Entertainment Network Limited on October 5, 2024 and sell it today you would earn a total of  6,405  from holding Entertainment Network Limited or generate 55.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.33%
Values	Daily Returns

Megastar Foods Limited  vs.  Entertainment Network Limited

Megastar Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Megastar Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Megastar Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Entertainment Network

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entertainment Network Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Megastar Foods and Entertainment Network

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

The idea behind Megastar Foods Limited and Entertainment Network Limited 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.