Correlation Between Mega Or and Reit 1

Can any of the company-specific risk be diversified away by investing in both Mega Or and Reit 1 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 Mega Or and Reit 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mega Or and Reit 1, you can compare the effects of market volatilities on Mega Or and Reit 1 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 Mega Or with a short position of Reit 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mega Or and Reit 1.

Diversification Opportunities for Mega Or and Reit 1

0.72

Correlation Coefficient

Mega Or  Reit 1

Poor diversification

The 3 months correlation between Mega and Reit is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Mega Or and Reit 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reit 1 and Mega Or 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 Mega Or are associated (or correlated) with Reit 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reit 1 has no effect on the direction of Mega Or i.e., Mega Or and Reit 1 go up and down completely randomly.

Pair Corralation between Mega Or and Reit 1

Assuming the 90 days trading horizon Mega Or is expected to generate 1.19 times more return on investment than Reit 1. However, Mega Or is 1.19 times more volatile than Reit 1. It trades about -0.02 of its potential returns per unit of risk. Reit 1 is currently generating about -0.06 per unit of risk. If you would invest  1,105,393  in Mega Or on December 29, 2024 and sell it today you would lose (36,393) from holding Mega Or or give up 3.29% of portfolio value over 90 days.

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

Mega Or  vs.  Reit 1

Mega Or

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mega Or has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Mega Or is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Reit 1

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reit 1 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.

Pair Trading with Mega Or and Reit 1

The main advantage of trading using opposite Mega Or and Reit 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mega Or position performs unexpectedly, Reit 1 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 Reit 1 will offset losses from the drop in Reit 1's long position.

The idea behind Mega Or and Reit 1 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.