Correlation Between Tetra Tech and Matrix Service

Can any of the company-specific risk be diversified away by investing in both Tetra Tech and Matrix Service 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 Tetra Tech and Matrix Service into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tetra Tech and Matrix Service Co, you can compare the effects of market volatilities on Tetra Tech and Matrix Service 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 Tetra Tech with a short position of Matrix Service. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tetra Tech and Matrix Service.

Diversification Opportunities for Tetra Tech and Matrix Service

-0.5

Correlation Coefficient

Tetra Tech  Matrix Service

Very good diversification

The 3 months correlation between Tetra and Matrix is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Tetra Tech and Matrix Service Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matrix Service and Tetra Tech 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 Tetra Tech are associated (or correlated) with Matrix Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matrix Service has no effect on the direction of Tetra Tech i.e., Tetra Tech and Matrix Service go up and down completely randomly.

Pair Corralation between Tetra Tech and Matrix Service

Given the investment horizon of 90 days Tetra Tech is expected to generate 2.85 times less return on investment than Matrix Service. But when comparing it to its historical volatility, Tetra Tech is 1.99 times less risky than Matrix Service. It trades about 0.04 of its potential returns per unit of risk. Matrix Service Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  602.00  in Matrix Service Co on September 4, 2024 and sell it today you would earn a total of  738.00  from holding Matrix Service Co or generate 122.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Tetra Tech  vs.  Matrix Service Co

Tetra Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tetra Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest sluggish performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Matrix Service

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Matrix Service Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Matrix Service showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tetra Tech and Matrix Service

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

The idea behind Tetra Tech and Matrix Service Co 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.