Correlation Between Security Investment and Matco Foods
Can any of the company-specific risk be diversified away by investing in both Security Investment 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 Security Investment and Matco Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Security Investment Bank and Matco Foods, you can compare the effects of market volatilities on Security Investment 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 Security Investment with a short position of Matco Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Security Investment and Matco Foods.
Diversification Opportunities for Security Investment and Matco Foods
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Security and Matco is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Security Investment Bank and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods and Security Investment 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 Security Investment Bank 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 Security Investment i.e., Security Investment and Matco Foods go up and down completely randomly.
Pair Corralation between Security Investment and Matco Foods
Assuming the 90 days trading horizon Security Investment is expected to generate 4.42 times less return on investment than Matco Foods. But when comparing it to its historical volatility, Security Investment Bank is 1.09 times less risky than Matco Foods. It trades about 0.06 of its potential returns per unit of risk. Matco Foods is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 2,342 in Matco Foods on August 28, 2024 and sell it today you would earn a total of 580.00 from holding Matco Foods or generate 24.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Security Investment Bank vs. Matco Foods
Performance |
| Timeline |
| Security Investment Bank |
| Matco Foods |
Security Investment and Matco Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Security Investment and Matco Foods
The main advantage of trading using opposite Security Investment and Matco Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Security Investment 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.| Security Investment vs. Masood Textile Mills | Security Investment vs. Fauji Foods | Security Investment vs. KSB Pumps | Security Investment vs. Mari Petroleum |
| Matco Foods vs. Dost Steels | Matco Foods vs. Atlas Insurance | Matco Foods vs. MCB Bank | Matco Foods vs. Askari Bank |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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