Correlation Between Masood Textile and Matco Foods

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

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

Diversification Opportunities for Masood Textile and Matco Foods

-0.64

Correlation Coefficient

Masood Textile  Matco Foods

Excellent diversification

The 3 months correlation between Masood and Matco is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Masood Textile Mills and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods and Masood Textile 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 Masood Textile Mills 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 Masood Textile i.e., Masood Textile and Matco Foods go up and down completely randomly.

Pair Corralation between Masood Textile and Matco Foods

Assuming the 90 days trading horizon Masood Textile Mills is expected to under-perform the Matco Foods. In addition to that, Masood Textile is 1.31 times more volatile than Matco Foods. It trades about -0.01 of its total potential returns per unit of risk. Matco Foods is currently generating about 0.09 per unit of volatility. If you would invest  2,621  in Matco Foods on September 5, 2024 and sell it today you would earn a total of  436.00  from holding Matco Foods or generate 16.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	71.88%
Values	Daily Returns

Masood Textile Mills  vs.  Matco Foods

Masood Textile Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Masood Textile Mills has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Masood Textile is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Matco Foods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Matco Foods are ranked lower than 7 (%) 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.

Pair Trading with Masood Textile and Matco Foods

The main advantage of trading using opposite Masood Textile and Matco Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Masood Textile 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 Masood Textile Mills 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..