Correlation Between Megastar Foods and Computer Age

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

Diversification Opportunities for Megastar Foods and Computer Age

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Megastar and Computer is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Megastar Foods Limited and Computer Age Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Computer Age Management 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 Computer Age. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Computer Age Management has no effect on the direction of Megastar Foods i.e., Megastar Foods and Computer Age go up and down completely randomly.

Pair Corralation between Megastar Foods and Computer Age

Assuming the 90 days trading horizon Megastar Foods is expected to generate 10.86 times less return on investment than Computer Age. But when comparing it to its historical volatility, Megastar Foods Limited is 1.47 times less risky than Computer Age. It trades about 0.01 of its potential returns per unit of risk. Computer Age Management is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  129,327  in Computer Age Management on April 20, 2025 and sell it today you would earn a total of  291,823  from holding Computer Age Management or generate 225.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Megastar Foods Limited  vs.  Computer Age Management

 Performance 
       Timeline  
Megastar Foods 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Megastar Foods Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Megastar Foods sustained solid returns over the last few months and may actually be approaching a breakup point.
Computer Age Management 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Computer Age may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Megastar Foods and Computer Age Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Megastar Foods and Computer Age

The main advantage of trading using opposite Megastar Foods and Computer Age positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Megastar Foods position performs unexpectedly, Computer Age 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 Computer Age will offset losses from the drop in Computer Age's long position.
The idea behind Megastar Foods Limited and Computer Age Management 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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