Correlation Between Megastar Foods and Man Infraconstructio

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

Diversification Opportunities for Megastar Foods and Man Infraconstructio

-0.28

Correlation Coefficient

Megastar Foods  Man Infraconstructio

Very good diversification

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

Pair Corralation between Megastar Foods and Man Infraconstructio

Assuming the 90 days trading horizon Megastar Foods Limited is expected to generate 1.89 times more return on investment than Man Infraconstructio. However, Megastar Foods is 1.89 times more volatile than Man Infraconstruction Limited. It trades about 0.31 of its potential returns per unit of risk. Man Infraconstruction Limited is currently generating about 0.01 per unit of risk. If you would invest  23,308  in Megastar Foods Limited on October 10, 2024 and sell it today you would earn a total of  6,818  from holding Megastar Foods Limited or generate 29.25% return on investment over 90 days.

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

Megastar Foods Limited  vs.  Man Infraconstruction 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.

Man Infraconstruction

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Man Infraconstruction Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain technical and fundamental indicators, Man Infraconstructio reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Megastar Foods and Man Infraconstructio

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

The idea behind Megastar Foods Limited and Man Infraconstruction 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.