Correlation Between Cool and Matson

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

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

Diversification Opportunities for Cool and Matson

0.57

Correlation Coefficient

Cool  Matson

Very weak diversification

The 3 months correlation between Cool and Matson is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cool Company and Matson Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matson Inc and Cool 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 Cool Company are associated (or correlated) with Matson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matson Inc has no effect on the direction of Cool i.e., Cool and Matson go up and down completely randomly.

Pair Corralation between Cool and Matson

Given the investment horizon of 90 days Cool Company is expected to under-perform the Matson. In addition to that, Cool is 1.75 times more volatile than Matson Inc. It trades about -0.18 of its total potential returns per unit of risk. Matson Inc is currently generating about -0.03 per unit of volatility. If you would invest  13,620  in Matson Inc on December 27, 2024 and sell it today you would lose (558.00) from holding Matson Inc or give up 4.1% of portfolio value over 90 days.

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

Cool Company  vs.  Matson Inc

Cool Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cool Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Matson Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matson Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Matson is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cool and Matson

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

The idea behind Cool Company and Matson Inc 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.