Correlation Between Avanceon and Matco Foods

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

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

Diversification Opportunities for Avanceon and Matco Foods

0.77

Correlation Coefficient

Avanceon  Matco Foods

Poor diversification

The 3 months correlation between Avanceon and Matco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Avanceon and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods and Avanceon 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 Avanceon 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 Avanceon i.e., Avanceon and Matco Foods go up and down completely randomly.

Pair Corralation between Avanceon and Matco Foods

Assuming the 90 days trading horizon Avanceon is expected to generate 6.14 times less return on investment than Matco Foods. But when comparing it to its historical volatility, Avanceon is 1.54 times less risky than Matco Foods. It trades about 0.07 of its potential returns per unit of risk. Matco Foods is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,374  in Matco Foods on October 23, 2024 and sell it today you would earn a total of  2,127  from holding Matco Foods or generate 89.6% return on investment over 90 days.

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

Avanceon  vs.  Matco Foods

Avanceon

Risk-Adjusted Performance

5 of 100

Modest

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

Matco Foods

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Matco Foods are ranked lower than 20 (%) 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 Avanceon and Matco Foods

The main advantage of trading using opposite Avanceon and Matco Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avanceon 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 Avanceon 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.