Correlation Between Matco Foods and EFU General

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

By analyzing existing cross correlation between Matco Foods and EFU General Insurance, you can compare the effects of market volatilities on Matco Foods and EFU General 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 EFU General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matco Foods and EFU General.

Diversification Opportunities for Matco Foods and EFU General

0.71

Correlation Coefficient

Matco Foods  EFU General

Poor diversification

The 3 months correlation between Matco and EFU is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Matco Foods and EFU General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EFU General Insurance 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 EFU General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EFU General Insurance has no effect on the direction of Matco Foods i.e., Matco Foods and EFU General go up and down completely randomly.

Pair Corralation between Matco Foods and EFU General

Assuming the 90 days trading horizon Matco Foods is expected to generate 0.98 times more return on investment than EFU General. However, Matco Foods is 1.02 times less risky than EFU General. It trades about 0.26 of its potential returns per unit of risk. EFU General Insurance is currently generating about 0.16 per unit of risk. If you would invest  2,485  in Matco Foods on September 14, 2024 and sell it today you would earn a total of  1,817  from holding Matco Foods or generate 73.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Matco Foods  vs.  EFU General Insurance

Matco Foods

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Matco Foods are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Matco Foods reported solid returns over the last few months and may actually be approaching a breakup point.

EFU General Insurance

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EFU General Insurance are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EFU General sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matco Foods and EFU General

The main advantage of trading using opposite Matco Foods and EFU General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matco Foods position performs unexpectedly, EFU General 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 EFU General will offset losses from the drop in EFU General's long position.

The idea behind Matco Foods and EFU General Insurance 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.