Correlation Between KOT Addu and Matco Foods
Can any of the company-specific risk be diversified away by investing in both KOT Addu 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 KOT Addu and Matco Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KOT Addu Power and Matco Foods, you can compare the effects of market volatilities on KOT Addu 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 KOT Addu with a short position of Matco Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of KOT Addu and Matco Foods.
Diversification Opportunities for KOT Addu and Matco Foods
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between KOT and Matco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding KOT Addu Power and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods and KOT Addu 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 KOT Addu Power 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 KOT Addu i.e., KOT Addu and Matco Foods go up and down completely randomly.
Pair Corralation between KOT Addu and Matco Foods
Assuming the 90 days trading horizon KOT Addu Power is expected to under-perform the Matco Foods. But the stock apears to be less risky and, when comparing its historical volatility, KOT Addu Power is 5.91 times less risky than Matco Foods. The stock trades about -0.1 of its potential returns per unit of risk. The Matco Foods is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 4,500 in Matco Foods on October 21, 2024 and sell it today you would lose (23.00) from holding Matco Foods or give up 0.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
KOT Addu Power vs. Matco Foods
Performance |
| Timeline |
| KOT Addu Power |
| Matco Foods |
KOT Addu and Matco Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KOT Addu and Matco Foods
The main advantage of trading using opposite KOT Addu and Matco Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KOT Addu 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.| KOT Addu vs. Soneri Bank | KOT Addu vs. Sardar Chemical Industries | KOT Addu vs. Atlas Insurance | KOT Addu vs. Reliance Insurance Co |
| Matco Foods vs. Masood Textile Mills | Matco Foods vs. Fauji Foods | Matco Foods vs. KSB Pumps | Matco Foods vs. Mari Petroleum |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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