Correlation Between Megastar Foods and Sakar Healthcare

Can any of the company-specific risk be diversified away by investing in both Megastar Foods and Sakar Healthcare 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 Sakar Healthcare 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 Sakar Healthcare Limited, you can compare the effects of market volatilities on Megastar Foods and Sakar Healthcare 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 Sakar Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Megastar Foods and Sakar Healthcare.

Diversification Opportunities for Megastar Foods and Sakar Healthcare

0.59

Correlation Coefficient

Megastar Foods  Sakar Healthcare

Very weak diversification

The 3 months correlation between Megastar and Sakar is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Megastar Foods Limited and Sakar Healthcare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sakar Healthcare 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 Sakar Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sakar Healthcare has no effect on the direction of Megastar Foods i.e., Megastar Foods and Sakar Healthcare go up and down completely randomly.

Pair Corralation between Megastar Foods and Sakar Healthcare

Assuming the 90 days trading horizon Megastar Foods Limited is expected to under-perform the Sakar Healthcare. In addition to that, Megastar Foods is 1.29 times more volatile than Sakar Healthcare Limited. It trades about -0.08 of its total potential returns per unit of risk. Sakar Healthcare Limited is currently generating about -0.02 per unit of volatility. If you would invest  32,520  in Sakar Healthcare Limited on September 20, 2024 and sell it today you would lose (1,370) from holding Sakar Healthcare Limited or give up 4.21% of portfolio value over 90 days.

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

Megastar Foods Limited  vs.  Sakar Healthcare 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 unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Sakar Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Megastar Foods and Sakar Healthcare

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

The idea behind Megastar Foods Limited and Sakar Healthcare 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.