Correlation Between Megachem Public and President Bakery
Can any of the company-specific risk be diversified away by investing in both Megachem Public and President Bakery 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 President Bakery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Megachem Public and President Bakery Public, you can compare the effects of market volatilities on Megachem Public and President Bakery 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 President Bakery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Megachem Public and President Bakery.
Diversification Opportunities for Megachem Public and President Bakery
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Megachem and President is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Megachem Public and President Bakery Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Bakery Public 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 President Bakery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Bakery Public has no effect on the direction of Megachem Public i.e., Megachem Public and President Bakery go up and down completely randomly.
Pair Corralation between Megachem Public and President Bakery
Assuming the 90 days trading horizon Megachem Public is expected to generate 78.2 times more return on investment than President Bakery. However, Megachem Public is 78.2 times more volatile than President Bakery Public. It trades about 0.05 of its potential returns per unit of risk. President Bakery Public is currently generating about -0.05 per unit of risk. If you would invest 280.00 in Megachem Public on August 31, 2024 and sell it today you would lose (76.00) from holding Megachem Public or give up 27.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Megachem Public vs. President Bakery Public
Performance |
| Timeline |
| Megachem Public |
| President Bakery Public |
Megachem Public and President Bakery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Megachem Public and President Bakery
The main advantage of trading using opposite Megachem Public and President Bakery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Megachem Public position performs unexpectedly, President Bakery 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 President Bakery will offset losses from the drop in President Bakery's long position.| Megachem Public vs. PTT Public | Megachem Public vs. The Siam Commercial | Megachem Public vs. Airports of Thailand | Megachem Public vs. CP ALL Public |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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