Correlation Between Al Ghazi and Matco Foods

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

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

Diversification Opportunities for Al Ghazi and Matco Foods

0.55

Correlation Coefficient

Al Ghazi  Matco Foods

Very weak diversification

The 3 months correlation between AGTL and Matco is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Al Ghazi Tractors and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods and Al Ghazi 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 Al Ghazi Tractors 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 Al Ghazi i.e., Al Ghazi and Matco Foods go up and down completely randomly.

Pair Corralation between Al Ghazi and Matco Foods

Assuming the 90 days trading horizon Al Ghazi is expected to generate 1.59 times less return on investment than Matco Foods. But when comparing it to its historical volatility, Al Ghazi Tractors is 1.63 times less risky than Matco Foods. It trades about 0.29 of its potential returns per unit of risk. Matco Foods is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  2,900  in Matco Foods on September 12, 2024 and sell it today you would earn a total of  879.00  from holding Matco Foods or generate 30.31% return on investment over 90 days.

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

Al Ghazi Tractors  vs.  Matco Foods

Al Ghazi Tractors

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Al Ghazi Tractors are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Al Ghazi sustained solid returns over the last few months and may actually be approaching a breakup point.

Matco Foods

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Matco Foods are ranked lower than 17 (%) 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 Al Ghazi and Matco Foods

The main advantage of trading using opposite Al Ghazi and Matco Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Al Ghazi 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 Al Ghazi Tractors 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.

Check out your portfolio center.

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.