Correlation Between Megawide Construction and Century Pacific
Can any of the company-specific risk be diversified away by investing in both Megawide Construction and Century Pacific 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 Century Pacific 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 Century Pacific Food, you can compare the effects of market volatilities on Megawide Construction and Century Pacific 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 Century Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Megawide Construction and Century Pacific.
Diversification Opportunities for Megawide Construction and Century Pacific
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Megawide and Century is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Megawide Construction Corp and Century Pacific Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Pacific Food 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 Century Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Pacific Food has no effect on the direction of Megawide Construction i.e., Megawide Construction and Century Pacific go up and down completely randomly.
Pair Corralation between Megawide Construction and Century Pacific
Assuming the 90 days trading horizon Megawide Construction is expected to generate 1.78 times less return on investment than Century Pacific. But when comparing it to its historical volatility, Megawide Construction Corp is 2.81 times less risky than Century Pacific. It trades about 0.29 of its potential returns per unit of risk. Century Pacific Food is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 4,080 in Century Pacific Food on September 13, 2024 and sell it today you would earn a total of 205.00 from holding Century Pacific Food or generate 5.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 40.91% |
| Values | Daily Returns |
Megawide Construction Corp vs. Century Pacific Food
Performance |
| Timeline |
| Megawide Construction |
| Century Pacific Food |
Megawide Construction and Century Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Megawide Construction and Century Pacific
The main advantage of trading using opposite Megawide Construction and Century Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Megawide Construction position performs unexpectedly, Century Pacific 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 Century Pacific will offset losses from the drop in Century Pacific's long position.The idea behind Megawide Construction Corp and Century Pacific Food 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.
| Century Pacific vs. Megawide Construction Corp | Century Pacific vs. Apex Mining Co | Century Pacific vs. Union Bank of | Century Pacific vs. East West Banking |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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