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

0.29

Correlation Coefficient

Security Investment  Matco Foods

Modest diversification

The 3 months correlation between Security and Matco is 0.29. 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 1.58 times less return on investment than Matco Foods. In addition to that, Security Investment is 1.24 times more volatile than Matco Foods. It trades about 0.02 of its total potential returns per unit of risk. Matco Foods is currently generating about 0.04 per unit of volatility. If you would invest  2,766  in Matco Foods on September 3, 2024 and sell it today you would earn a total of  127.00  from holding Matco Foods or generate 4.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Security Investment Bank  vs.  Matco Foods

Security Investment Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Security Investment Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Security Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 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.

The idea behind Security Investment Bank 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.