Correlation Between Megastar Foods and Hindustan Zinc

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

Diversification Opportunities for Megastar Foods and Hindustan Zinc

-0.11

Correlation Coefficient

Megastar Foods  Hindustan Zinc

Good diversification

The 3 months correlation between Megastar and Hindustan is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Megastar Foods Limited and Hindustan Zinc Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindustan Zinc 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 Hindustan Zinc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindustan Zinc has no effect on the direction of Megastar Foods i.e., Megastar Foods and Hindustan Zinc go up and down completely randomly.

Pair Corralation between Megastar Foods and Hindustan Zinc

Assuming the 90 days trading horizon Megastar Foods Limited is expected to under-perform the Hindustan Zinc. But the stock apears to be less risky and, when comparing its historical volatility, Megastar Foods Limited is 1.53 times less risky than Hindustan Zinc. The stock trades about -0.48 of its potential returns per unit of risk. The Hindustan Zinc Limited is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  45,015  in Hindustan Zinc Limited on December 2, 2024 and sell it today you would lose (5,935) from holding Hindustan Zinc Limited or give up 13.18% of portfolio value over 90 days.

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

Megastar Foods Limited  vs.  Hindustan Zinc Limited

Megastar Foods

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hindustan Zinc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hindustan Zinc 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 forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Megastar Foods and Hindustan Zinc

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

The idea behind Megastar Foods Limited and Hindustan Zinc 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.