Correlation Between RB FOOD and Mega Lifesciences

Can any of the company-specific risk be diversified away by investing in both RB FOOD and Mega Lifesciences 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 RB FOOD and Mega Lifesciences into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RB FOOD SUPPLY and Mega Lifesciences Public, you can compare the effects of market volatilities on RB FOOD and Mega Lifesciences 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 RB FOOD with a short position of Mega Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of RB FOOD and Mega Lifesciences.

Diversification Opportunities for RB FOOD and Mega Lifesciences

0.78

Correlation Coefficient

RB FOOD  Mega Lifesciences

Poor diversification

The 3 months correlation between RBF-R and Mega is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding RB FOOD SUPPLY and Mega Lifesciences Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mega Lifesciences Public and RB FOOD 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 RB FOOD SUPPLY are associated (or correlated) with Mega Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mega Lifesciences Public has no effect on the direction of RB FOOD i.e., RB FOOD and Mega Lifesciences go up and down completely randomly.

Pair Corralation between RB FOOD and Mega Lifesciences

Assuming the 90 days trading horizon RB FOOD SUPPLY is expected to under-perform the Mega Lifesciences. In addition to that, RB FOOD is 2.77 times more volatile than Mega Lifesciences Public. It trades about -0.02 of its total potential returns per unit of risk. Mega Lifesciences Public is currently generating about -0.02 per unit of volatility. If you would invest  3,823  in Mega Lifesciences Public on September 3, 2024 and sell it today you would lose (348.00) from holding Mega Lifesciences Public or give up 9.1% of portfolio value over 90 days.

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

RB FOOD SUPPLY  vs.  Mega Lifesciences Public

RB FOOD SUPPLY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RB FOOD SUPPLY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers 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.

Mega Lifesciences Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mega Lifesciences Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with RB FOOD and Mega Lifesciences

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

The idea behind RB FOOD SUPPLY and Mega Lifesciences 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.