Correlation Between Mega Lifesciences and Carabao Group

Can any of the company-specific risk be diversified away by investing in both Mega Lifesciences and Carabao Group 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 Lifesciences and Carabao Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mega Lifesciences Public and Carabao Group Public, you can compare the effects of market volatilities on Mega Lifesciences and Carabao Group 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 Lifesciences with a short position of Carabao Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mega Lifesciences and Carabao Group.

Diversification Opportunities for Mega Lifesciences and Carabao Group

-0.27

Correlation Coefficient

Mega Lifesciences  Carabao Group

Very good diversification

The 3 months correlation between Mega and Carabao is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Mega Lifesciences Public and Carabao Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carabao Group Public and Mega Lifesciences 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 Lifesciences Public are associated (or correlated) with Carabao Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carabao Group Public has no effect on the direction of Mega Lifesciences i.e., Mega Lifesciences and Carabao Group go up and down completely randomly.

Pair Corralation between Mega Lifesciences and Carabao Group

Assuming the 90 days trading horizon Mega Lifesciences Public is expected to under-perform the Carabao Group. But the stock apears to be less risky and, when comparing its historical volatility, Mega Lifesciences Public is 1.04 times less risky than Carabao Group. The stock trades about -0.15 of its potential returns per unit of risk. The Carabao Group Public is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,250  in Carabao Group Public on September 15, 2024 and sell it today you would earn a total of  725.00  from holding Carabao Group Public or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Mega Lifesciences Public  vs.  Carabao Group Public

Mega Lifesciences Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mega Lifesciences Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Carabao Group Public

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carabao Group Public are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Carabao Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mega Lifesciences and Carabao Group

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

The idea behind Mega Lifesciences Public and Carabao Group Public 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.