Correlation Between STI Education and Megawide Construction

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

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

Diversification Opportunities for STI Education and Megawide Construction

0.31

Correlation Coefficient

STI Education  Megawide Construction

Weak diversification

The 3 months correlation between STI and Megawide is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding STI Education Systems and Megawide Construction Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megawide Construction and STI Education 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 STI Education Systems are associated (or correlated) with Megawide Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megawide Construction has no effect on the direction of STI Education i.e., STI Education and Megawide Construction go up and down completely randomly.

Pair Corralation between STI Education and Megawide Construction

Assuming the 90 days trading horizon STI Education is expected to generate 1.12 times less return on investment than Megawide Construction. In addition to that, STI Education is 1.85 times more volatile than Megawide Construction Corp. It trades about 0.1 of its total potential returns per unit of risk. Megawide Construction Corp is currently generating about 0.21 per unit of volatility. If you would invest  9,306  in Megawide Construction Corp on September 23, 2024 and sell it today you would earn a total of  434.00  from holding Megawide Construction Corp or generate 4.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	46.51%
Values	Daily Returns

STI Education Systems  vs.  Megawide Construction Corp

STI Education Systems

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in STI Education Systems are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, STI Education exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with STI Education and Megawide Construction

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

The idea behind STI Education Systems and Megawide Construction 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.