Correlation Between IBL HealthCare and Matco Foods

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

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

Diversification Opportunities for IBL HealthCare and Matco Foods

0.23

Correlation Coefficient

IBL HealthCare  Matco Foods

Modest diversification

The 3 months correlation between IBL and Matco is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding IBL HealthCare and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods and IBL HealthCare 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 IBL HealthCare 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 IBL HealthCare i.e., IBL HealthCare and Matco Foods go up and down completely randomly.

Pair Corralation between IBL HealthCare and Matco Foods

Assuming the 90 days trading horizon IBL HealthCare is expected to generate 0.74 times more return on investment than Matco Foods. However, IBL HealthCare is 1.34 times less risky than Matco Foods. It trades about -0.06 of its potential returns per unit of risk. Matco Foods is currently generating about -0.07 per unit of risk. If you would invest  4,145  in IBL HealthCare on December 29, 2024 and sell it today you would lose (435.00) from holding IBL HealthCare or give up 10.49% of portfolio value over 90 days.

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

IBL HealthCare  vs.  Matco Foods

IBL HealthCare

Risk-Adjusted Performance

Very Weak

Over the last 90 days IBL HealthCare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Matco Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matco Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with IBL HealthCare and Matco Foods

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

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..