Correlation Between Megawide Construction and Jollibee Foods

Can any of the company-specific risk be diversified away by investing in both Megawide Construction and Jollibee Foods 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 Megawide Construction and Jollibee Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Megawide Construction Corp and Jollibee Foods Corp, you can compare the effects of market volatilities on Megawide Construction and Jollibee Foods 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 Megawide Construction with a short position of Jollibee Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Megawide Construction and Jollibee Foods.

Diversification Opportunities for Megawide Construction and Jollibee Foods

-0.35

Correlation Coefficient

Megawide Construction  Jollibee Foods

Very good diversification

The 3 months correlation between Megawide and Jollibee is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Megawide Construction Corp and Jollibee Foods Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jollibee Foods Corp and Megawide Construction 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 Megawide Construction Corp are associated (or correlated) with Jollibee Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jollibee Foods Corp has no effect on the direction of Megawide Construction i.e., Megawide Construction and Jollibee Foods go up and down completely randomly.

Pair Corralation between Megawide Construction and Jollibee Foods

Assuming the 90 days trading horizon Megawide Construction Corp is expected to generate 0.74 times more return on investment than Jollibee Foods. However, Megawide Construction Corp is 1.36 times less risky than Jollibee Foods. It trades about 0.21 of its potential returns per unit of risk. Jollibee Foods Corp is currently generating about -0.07 per unit of risk. If you would invest  9,405  in Megawide Construction Corp on September 23, 2024 and sell it today you would earn a total of  335.00  from holding Megawide Construction Corp or generate 3.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	54.55%
Values	Daily Returns

Megawide Construction Corp  vs.  Jollibee Foods Corp

Megawide Construction

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Megawide Construction Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Megawide Construction may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Jollibee Foods Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jollibee Foods Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Jollibee Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Megawide Construction and Jollibee Foods

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

The idea behind Megawide Construction Corp and Jollibee Foods Corp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.