Correlation Between Matson Money and Absolute Capital

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

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

Diversification Opportunities for Matson Money and Absolute Capital

0.21

Correlation Coefficient

Matson Money  Absolute Capital

Modest diversification

The 3 months correlation between Matson and Absolute is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Matson Money Equity and Absolute Capital Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Opp and Matson Money 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 Matson Money Equity are associated (or correlated) with Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Opp has no effect on the direction of Matson Money i.e., Matson Money and Absolute Capital go up and down completely randomly.

Pair Corralation between Matson Money and Absolute Capital

Assuming the 90 days horizon Matson Money Equity is expected to under-perform the Absolute Capital. In addition to that, Matson Money is 2.97 times more volatile than Absolute Capital Opportunities. It trades about -0.28 of its total potential returns per unit of risk. Absolute Capital Opportunities is currently generating about -0.11 per unit of volatility. If you would invest  1,057  in Absolute Capital Opportunities on December 5, 2024 and sell it today you would lose (8.00) from holding Absolute Capital Opportunities or give up 0.76% of portfolio value over 90 days.

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

Matson Money Equity  vs.  Absolute Capital Opportunities

Matson Money Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matson Money Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fragile performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Absolute Capital Opp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Absolute Capital Opportunities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Absolute Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Matson Money and Absolute Capital

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

The idea behind Matson Money Equity and Absolute Capital Opportunities 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.