Correlation Between Megachem Public and Samart Digital

Can any of the company-specific risk be diversified away by investing in both Megachem Public and Samart Digital 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 Samart Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Megachem Public and Samart Digital Public, you can compare the effects of market volatilities on Megachem Public and Samart Digital 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 Samart Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Megachem Public and Samart Digital.

Diversification Opportunities for Megachem Public and Samart Digital

-0.86

Correlation Coefficient

Megachem Public  Samart Digital

Pay attention - limited upside

The 3 months correlation between Megachem and Samart is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Megachem Public and Samart Digital Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samart Digital 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 Samart Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samart Digital Public has no effect on the direction of Megachem Public i.e., Megachem Public and Samart Digital go up and down completely randomly.

Pair Corralation between Megachem Public and Samart Digital

Assuming the 90 days trading horizon Megachem Public is expected to under-perform the Samart Digital. But the stock apears to be less risky and, when comparing its historical volatility, Megachem Public is 12.09 times less risky than Samart Digital. The stock trades about -0.16 of its potential returns per unit of risk. The Samart Digital Public is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Samart Digital Public on September 14, 2024 and sell it today you would earn a total of  3.00  from holding Samart Digital Public or generate 150.0% return on investment over 90 days.

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

Megachem Public  vs.  Samart Digital Public

Megachem Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Megachem Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators 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.

Samart Digital Public

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Samart Digital Public are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Samart Digital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Megachem Public and Samart Digital

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

The idea behind Megachem Public and Samart Digital 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..