Correlation Between Mega Financial and CVC Technologies
Can any of the company-specific risk be diversified away by investing in both Mega Financial and CVC Technologies 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 Financial and CVC Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mega Financial Holding and CVC Technologies, you can compare the effects of market volatilities on Mega Financial and CVC Technologies 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 Financial with a short position of CVC Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mega Financial and CVC Technologies.
Diversification Opportunities for Mega Financial and CVC Technologies
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Mega and CVC is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Mega Financial Holding and CVC Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVC Technologies and Mega Financial 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 Financial Holding are associated (or correlated) with CVC Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVC Technologies has no effect on the direction of Mega Financial i.e., Mega Financial and CVC Technologies go up and down completely randomly.
Pair Corralation between Mega Financial and CVC Technologies
Assuming the 90 days trading horizon Mega Financial Holding is expected to generate 0.39 times more return on investment than CVC Technologies. However, Mega Financial Holding is 2.57 times less risky than CVC Technologies. It trades about 0.1 of its potential returns per unit of risk. CVC Technologies is currently generating about -0.17 per unit of risk. If you would invest 3,880 in Mega Financial Holding on November 6, 2024 and sell it today you would earn a total of 35.00 from holding Mega Financial Holding or generate 0.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mega Financial Holding vs. CVC Technologies
Performance |
| Timeline |
| Mega Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| CVC Technologies |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Mega Financial and CVC Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mega Financial and CVC Technologies
The main advantage of trading using opposite Mega Financial and CVC Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mega Financial position performs unexpectedly, CVC Technologies 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 CVC Technologies will offset losses from the drop in CVC Technologies' long position.The idea behind Mega Financial Holding and CVC Technologies 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.Check out your portfolio center.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 CEOs Directory module to screen CEOs from public companies around the world.
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