Correlation Between Megastar Foods and Vesuvius India

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

Diversification Opportunities for Megastar Foods and Vesuvius India

-0.13

Correlation Coefficient

Megastar Foods  Vesuvius India

Good diversification

The 3 months correlation between Megastar and Vesuvius is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Megastar Foods Limited and Vesuvius India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vesuvius India 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 Vesuvius India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vesuvius India has no effect on the direction of Megastar Foods i.e., Megastar Foods and Vesuvius India go up and down completely randomly.

Pair Corralation between Megastar Foods and Vesuvius India

Assuming the 90 days trading horizon Megastar Foods Limited is expected to under-perform the Vesuvius India. In addition to that, Megastar Foods is 1.17 times more volatile than Vesuvius India Limited. It trades about -0.04 of its total potential returns per unit of risk. Vesuvius India Limited is currently generating about 0.02 per unit of volatility. If you would invest  450,475  in Vesuvius India Limited on December 29, 2024 and sell it today you would earn a total of  4,975  from holding Vesuvius India Limited or generate 1.1% 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.  Vesuvius India 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.

Vesuvius India

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vesuvius India Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Vesuvius India is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Megastar Foods and Vesuvius India

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

The idea behind Megastar Foods Limited and Vesuvius India 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.