Correlation Between Megastar Foods and GACM Technologies

Can any of the company-specific risk be diversified away by investing in both Megastar Foods and GACM Technologies 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 GACM Technologies 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 GACM Technologies Limited, you can compare the effects of market volatilities on Megastar Foods and GACM Technologies 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 GACM Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Megastar Foods and GACM Technologies.

Diversification Opportunities for Megastar Foods and GACM Technologies

0.4

Correlation Coefficient

Megastar Foods  GACM Technologies

Very weak diversification

The 3 months correlation between Megastar and GACM is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Megastar Foods Limited and GACM Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GACM Technologies 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 GACM Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GACM Technologies has no effect on the direction of Megastar Foods i.e., Megastar Foods and GACM Technologies go up and down completely randomly.

Pair Corralation between Megastar Foods and GACM Technologies

Assuming the 90 days trading horizon Megastar Foods Limited is expected to generate 1.16 times more return on investment than GACM Technologies. However, Megastar Foods is 1.16 times more volatile than GACM Technologies Limited. It trades about 0.12 of its potential returns per unit of risk. GACM Technologies Limited is currently generating about -0.07 per unit of risk. If you would invest  24,985  in Megastar Foods Limited on October 10, 2024 and sell it today you would earn a total of  5,141  from holding Megastar Foods Limited or generate 20.58% return on investment over 90 days.

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

Megastar Foods Limited  vs.  GACM Technologies Limited

Megastar Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Megastar Foods Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Megastar Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

GACM Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GACM Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Megastar Foods and GACM Technologies

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

The idea behind Megastar Foods Limited and GACM Technologies 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.