Correlation Between JS Investments and Matco Foods

Can any of the company-specific risk be diversified away by investing in both JS Investments 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 JS Investments and Matco Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JS Investments and Matco Foods, you can compare the effects of market volatilities on JS Investments 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 JS Investments with a short position of Matco Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of JS Investments and Matco Foods.

Diversification Opportunities for JS Investments and Matco Foods

0.33

Correlation Coefficient

JS Investments  Matco Foods

Weak diversification

The 3 months correlation between JSIL and Matco is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding JS Investments and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods and JS Investments 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 JS Investments 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 JS Investments i.e., JS Investments and Matco Foods go up and down completely randomly.

Pair Corralation between JS Investments and Matco Foods

Assuming the 90 days trading horizon JS Investments is expected to generate 1.45 times more return on investment than Matco Foods. However, JS Investments is 1.45 times more volatile than Matco Foods. It trades about 0.18 of its potential returns per unit of risk. Matco Foods is currently generating about 0.04 per unit of risk. If you would invest  1,625  in JS Investments on September 3, 2024 and sell it today you would earn a total of  932.00  from holding JS Investments or generate 57.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

JS Investments  vs.  Matco Foods

JS Investments

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JS Investments are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JS Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

Matco Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Matco Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Matco Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with JS Investments and Matco Foods

The main advantage of trading using opposite JS Investments and Matco Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JS Investments 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.

The idea behind JS Investments and Matco Foods pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.