Correlation Between Megastar Foods and Kaushalya Infrastructure

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

Diversification Opportunities for Megastar Foods and Kaushalya Infrastructure

0.75

Correlation Coefficient

Megastar Foods  Kaushalya Infrastructure

Poor diversification

The 3 months correlation between Megastar and Kaushalya is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Megastar Foods Limited and Kaushalya Infrastructure Devel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaushalya Infrastructure 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 Kaushalya Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaushalya Infrastructure has no effect on the direction of Megastar Foods i.e., Megastar Foods and Kaushalya Infrastructure go up and down completely randomly.

Pair Corralation between Megastar Foods and Kaushalya Infrastructure

Assuming the 90 days trading horizon Megastar Foods Limited is expected to under-perform the Kaushalya Infrastructure. But the stock apears to be less risky and, when comparing its historical volatility, Megastar Foods Limited is 1.25 times less risky than Kaushalya Infrastructure. The stock trades about -0.04 of its potential returns per unit of risk. The Kaushalya Infrastructure Development is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  88,110  in Kaushalya Infrastructure Development on December 30, 2024 and sell it today you would lose (345.00) from holding Kaushalya Infrastructure Development or give up 0.39% of portfolio value over 90 days.

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

Megastar Foods Limited  vs.  Kaushalya Infrastructure Devel

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 unfluctuating 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.

Kaushalya Infrastructure

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kaushalya Infrastructure Development are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Kaushalya Infrastructure is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Megastar Foods and Kaushalya Infrastructure

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

The idea behind Megastar Foods Limited and Kaushalya Infrastructure Development 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.