Correlation Between Megastar Foods and Moksh Ornaments

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

Diversification Opportunities for Megastar Foods and Moksh Ornaments

0.17

Correlation Coefficient

Megastar Foods  Moksh Ornaments

Average diversification

The 3 months correlation between Megastar and Moksh is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Megastar Foods Limited and Moksh Ornaments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moksh Ornaments 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 Moksh Ornaments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moksh Ornaments has no effect on the direction of Megastar Foods i.e., Megastar Foods and Moksh Ornaments go up and down completely randomly.

Pair Corralation between Megastar Foods and Moksh Ornaments

Assuming the 90 days trading horizon Megastar Foods Limited is expected to generate 0.75 times more return on investment than Moksh Ornaments. However, Megastar Foods Limited is 1.33 times less risky than Moksh Ornaments. It trades about 0.12 of its potential returns per unit of risk. Moksh Ornaments Limited is currently generating about 0.01 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Megastar Foods Limited  vs.  Moksh Ornaments 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 fragile basic indicators, Megastar Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Moksh Ornaments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Moksh Ornaments Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward-looking signals, Moksh Ornaments is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Megastar Foods and Moksh Ornaments

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

The idea behind Megastar Foods Limited and Moksh Ornaments 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.