Correlation Between Gatron Industries and Matco Foods
Can any of the company-specific risk be diversified away by investing in both Gatron Industries and Matco 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 Gatron Industries and Matco Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gatron Industries and Matco Foods, you can compare the effects of market volatilities on Gatron Industries and Matco 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 Gatron Industries with a short position of Matco Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gatron Industries and Matco Foods.
Diversification Opportunities for Gatron Industries and Matco Foods
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gatron and Matco is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Gatron Industries and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods and Gatron Industries 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 Gatron Industries are associated (or correlated) with Matco Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matco Foods has no effect on the direction of Gatron Industries i.e., Gatron Industries and Matco Foods go up and down completely randomly.
Pair Corralation between Gatron Industries and Matco Foods
Assuming the 90 days trading horizon Gatron Industries is expected to generate 18.91 times less return on investment than Matco Foods. But when comparing it to its historical volatility, Gatron Industries is 4.59 times less risky than Matco Foods. It trades about 0.09 of its potential returns per unit of risk. Matco Foods is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 2,998 in Matco Foods on September 14, 2024 and sell it today you would earn a total of 1,304 from holding Matco Foods or generate 43.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gatron Industries vs. Matco Foods
Performance |
| Timeline |
| Gatron Industries |
| Matco Foods |
Gatron Industries and Matco Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gatron Industries and Matco Foods
The main advantage of trading using opposite Gatron Industries and Matco Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gatron Industries position performs unexpectedly, Matco 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 Matco Foods will offset losses from the drop in Matco Foods' long position.| Gatron Industries vs. Adamjee Insurance | Gatron Industries vs. The Organic Meat | Gatron Industries vs. Askari General Insurance | Gatron Industries vs. Reliance Insurance Co |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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