Correlation Between Matco Foods and Fauji Foods
Can any of the company-specific risk be diversified away by investing in both Matco Foods and Fauji 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 Matco Foods and Fauji Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matco Foods and Fauji Foods, you can compare the effects of market volatilities on Matco Foods and Fauji 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 Matco Foods with a short position of Fauji Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matco Foods and Fauji Foods.
Diversification Opportunities for Matco Foods and Fauji Foods
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Matco and Fauji is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Matco Foods and Fauji Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Foods and Matco 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 Matco Foods are associated (or correlated) with Fauji Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fauji Foods has no effect on the direction of Matco Foods i.e., Matco Foods and Fauji Foods go up and down completely randomly.
Pair Corralation between Matco Foods and Fauji Foods
Assuming the 90 days trading horizon Matco Foods is expected to generate 2.11 times less return on investment than Fauji Foods. But when comparing it to its historical volatility, Matco Foods is 1.01 times less risky than Fauji Foods. It trades about 0.05 of its potential returns per unit of risk. Fauji Foods is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 505.00 in Fauji Foods on November 5, 2024 and sell it today you would earn a total of 1,069 from holding Fauji Foods or generate 211.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.89% |
| Values | Daily Returns |
Matco Foods vs. Fauji Foods
Performance |
| Timeline |
| Matco Foods |
| Fauji Foods |
Matco Foods and Fauji Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matco Foods and Fauji Foods
The main advantage of trading using opposite Matco Foods and Fauji Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matco Foods position performs unexpectedly, Fauji 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 Fauji Foods will offset losses from the drop in Fauji Foods' long position.| Matco Foods vs. Pak Datacom | Matco Foods vs. 786 Investment Limited | Matco Foods vs. EFU General Insurance | Matco Foods vs. United Insurance |
| Fauji Foods vs. Fateh Sports Wear | Fauji Foods vs. National Foods | Fauji Foods vs. Matco Foods | Fauji Foods vs. Sardar Chemical Industries |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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