Correlation Between Megastar Foods and Jubilant Foodworks

Can any of the company-specific risk be diversified away by investing in both Megastar Foods and Jubilant Foodworks 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 Megastar Foods and Jubilant Foodworks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Megastar Foods Limited and Jubilant Foodworks Limited, you can compare the effects of market volatilities on Megastar Foods and Jubilant Foodworks 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 Megastar Foods with a short position of Jubilant Foodworks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Megastar Foods and Jubilant Foodworks.

Diversification Opportunities for Megastar Foods and Jubilant Foodworks

0.37

Correlation Coefficient

Megastar Foods  Jubilant Foodworks

Weak diversification

The 3 months correlation between Megastar and Jubilant is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Megastar Foods Limited and Jubilant Foodworks Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jubilant Foodworks and Megastar Foods 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 Megastar Foods Limited are associated (or correlated) with Jubilant Foodworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jubilant Foodworks has no effect on the direction of Megastar Foods i.e., Megastar Foods and Jubilant Foodworks go up and down completely randomly.

Pair Corralation between Megastar Foods and Jubilant Foodworks

Assuming the 90 days trading horizon Megastar Foods Limited is expected to under-perform the Jubilant Foodworks. In addition to that, Megastar Foods is 1.4 times more volatile than Jubilant Foodworks Limited. It trades about -0.07 of its total potential returns per unit of risk. Jubilant Foodworks Limited is currently generating about -0.01 per unit of volatility. If you would invest  69,545  in Jubilant Foodworks Limited on September 19, 2024 and sell it today you would lose (1,255) from holding Jubilant Foodworks Limited or give up 1.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Megastar Foods Limited  vs.  Jubilant Foodworks Limited

Megastar Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Megastar Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Jubilant Foodworks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jubilant Foodworks Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Jubilant Foodworks is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Megastar Foods and Jubilant Foodworks

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

The idea behind Megastar Foods Limited and Jubilant Foodworks Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.