Correlation Between Amada and Megaworld Corp
Can any of the company-specific risk be diversified away by investing in both Amada and Megaworld Corp 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 Amada and Megaworld Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amada Co and Megaworld Corp ADR, you can compare the effects of market volatilities on Amada and Megaworld Corp 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 Amada with a short position of Megaworld Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amada and Megaworld Corp.
Diversification Opportunities for Amada and Megaworld Corp
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Amada and Megaworld is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Amada Co and Megaworld Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megaworld Corp ADR and Amada 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 Amada Co are associated (or correlated) with Megaworld Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megaworld Corp ADR has no effect on the direction of Amada i.e., Amada and Megaworld Corp go up and down completely randomly.
Pair Corralation between Amada and Megaworld Corp
Assuming the 90 days horizon Amada Co is expected to generate 0.48 times more return on investment than Megaworld Corp. However, Amada Co is 2.1 times less risky than Megaworld Corp. It trades about 0.06 of its potential returns per unit of risk. Megaworld Corp ADR is currently generating about -0.02 per unit of risk. If you would invest 3,125 in Amada Co on January 26, 2024 and sell it today you would earn a total of 1,329 from holding Amada Co or generate 42.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 96.76% |
| Values | Daily Returns |
Amada Co vs. Megaworld Corp ADR
Performance |
| Timeline |
| Amada |
| Megaworld Corp ADR |
Amada and Megaworld Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amada and Megaworld Corp
The main advantage of trading using opposite Amada and Megaworld Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amada position performs unexpectedly, Megaworld Corp 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 Megaworld Corp will offset losses from the drop in Megaworld Corp's long position.The idea behind Amada Co and Megaworld Corp ADR 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.| Megaworld Corp vs. BDO Unibank ADR | Megaworld Corp vs. Ayala Corp ADR | Megaworld Corp vs. Alliance Global Group | Megaworld Corp vs. Jollibee Foods Corp |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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