Correlation Between One 97 and Megastar Foods

Can any of the company-specific risk be diversified away by investing in both One 97 and Megastar Foods 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 One 97 and Megastar Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between One 97 Communications and Megastar Foods Limited, you can compare the effects of market volatilities on One 97 and Megastar Foods 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 One 97 with a short position of Megastar Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of One 97 and Megastar Foods.

Diversification Opportunities for One 97 and Megastar Foods

-0.71

Correlation Coefficient

One 97  Megastar Foods

Pay attention - limited upside

The 3 months correlation between One and Megastar is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding One 97 Communications and Megastar Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megastar Foods and One 97 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 One 97 Communications are associated (or correlated) with Megastar Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megastar Foods has no effect on the direction of One 97 i.e., One 97 and Megastar Foods go up and down completely randomly.

Pair Corralation between One 97 and Megastar Foods

Assuming the 90 days trading horizon One 97 Communications is expected to generate 1.3 times more return on investment than Megastar Foods. However, One 97 is 1.3 times more volatile than Megastar Foods Limited. It trades about 0.22 of its potential returns per unit of risk. Megastar Foods Limited is currently generating about -0.07 per unit of risk. If you would invest  65,505  in One 97 Communications on September 19, 2024 and sell it today you would earn a total of  35,960  from holding One 97 Communications or generate 54.9% return on investment over 90 days.

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

One 97 Communications  vs.  Megastar Foods Limited

One 97 Communications

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in One 97 Communications are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, One 97 displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with One 97 and Megastar Foods

The main advantage of trading using opposite One 97 and Megastar Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if One 97 position performs unexpectedly, Megastar Foods 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 Megastar Foods will offset losses from the drop in Megastar Foods' long position.

The idea behind One 97 Communications and Megastar Foods 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.