Correlation Between Megachem Public and Peerapat Technology

Can any of the company-specific risk be diversified away by investing in both Megachem Public and Peerapat Technology 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 Megachem Public and Peerapat Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Megachem Public and Peerapat Technology

0.53

Correlation Coefficient

Megachem Public  Peerapat Technology

Very weak diversification

The 3 months correlation between Megachem and Peerapat is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Megachem Public and Peerapat Technology Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peerapat Technology and Megachem Public 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 Megachem Public are associated (or correlated) with Peerapat Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peerapat Technology has no effect on the direction of Megachem Public i.e., Megachem Public and Peerapat Technology go up and down completely randomly.

Pair Corralation between Megachem Public and Peerapat Technology

Assuming the 90 days trading horizon Megachem Public is expected to under-perform the Peerapat Technology. But the stock apears to be less risky and, when comparing its historical volatility, Megachem Public is 1.11 times less risky than Peerapat Technology. The stock trades about -0.16 of its potential returns per unit of risk. The Peerapat Technology Public is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  145.00  in Peerapat Technology Public on October 8, 2024 and sell it today you would lose (13.00) from holding Peerapat Technology Public or give up 8.97% of portfolio value over 90 days.

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

Megachem Public  vs.  Peerapat Technology Public

Megachem Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Megachem Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Peerapat Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peerapat Technology Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting 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 Megachem Public and Peerapat Technology

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

The idea behind Megachem Public and Peerapat Technology Public 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.