Correlation Between United Insurance and Matco Foods
Can any of the company-specific risk be diversified away by investing in both United Insurance 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 United Insurance and Matco Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Insurance and Matco Foods, you can compare the effects of market volatilities on United Insurance 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 United Insurance with a short position of Matco Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Insurance and Matco Foods.
Diversification Opportunities for United Insurance and Matco Foods
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between United and Matco is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods and United Insurance 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 United Insurance 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 United Insurance i.e., United Insurance and Matco Foods go up and down completely randomly.
Pair Corralation between United Insurance and Matco Foods
Assuming the 90 days trading horizon United Insurance is expected to generate 11.49 times less return on investment than Matco Foods. But when comparing it to its historical volatility, United Insurance is 5.45 times less risky than Matco Foods. It trades about 0.04 of its potential returns per unit of risk. Matco Foods is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,705 in Matco Foods on September 2, 2024 and sell it today you would earn a total of 188.00 from holding Matco Foods or generate 6.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Insurance vs. Matco Foods
Performance |
| Timeline |
| United Insurance |
| Matco Foods |
United Insurance and Matco Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Insurance and Matco Foods
The main advantage of trading using opposite United Insurance and Matco Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Insurance 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.| United Insurance vs. Habib Bank | United Insurance vs. National Bank of | United Insurance vs. United Bank | United Insurance vs. MCB Bank |
| Matco Foods vs. Hi Tech Lubricants | Matco Foods vs. The Organic Meat | Matco Foods vs. Shifa International Hospitals | Matco Foods vs. Unity Foods |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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