Correlation Between MTY Food and Targa Resources

Can any of the company-specific risk be diversified away by investing in both MTY Food and Targa Resources 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 MTY Food and Targa Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MTY Food Group and Targa Resources Corp, you can compare the effects of market volatilities on MTY Food and Targa Resources 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 MTY Food with a short position of Targa Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTY Food and Targa Resources.

Diversification Opportunities for MTY Food and Targa Resources

0.43

Correlation Coefficient

MTY Food  Targa Resources

Very weak diversification

The 3 months correlation between MTY and Targa is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding MTY Food Group and Targa Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Targa Resources Corp and MTY Food 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 MTY Food Group are associated (or correlated) with Targa Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Targa Resources Corp has no effect on the direction of MTY Food i.e., MTY Food and Targa Resources go up and down completely randomly.

Pair Corralation between MTY Food and Targa Resources

Assuming the 90 days horizon MTY Food Group is expected to under-perform the Targa Resources. In addition to that, MTY Food is 1.07 times more volatile than Targa Resources Corp. It trades about -0.02 of its total potential returns per unit of risk. Targa Resources Corp is currently generating about 0.13 per unit of volatility. If you would invest  6,564  in Targa Resources Corp on October 11, 2024 and sell it today you would earn a total of  11,976  from holding Targa Resources Corp or generate 182.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

MTY Food Group  vs.  Targa Resources Corp

MTY Food Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MTY Food Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, MTY Food may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Targa Resources Corp

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with MTY Food and Targa Resources

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

The idea behind MTY Food Group and Targa Resources Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.