Correlation Between Matco Foods and Agha Steel

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

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

Diversification Opportunities for Matco Foods and Agha Steel

-0.52

Correlation Coefficient

Matco Foods  Agha Steel

Excellent diversification

The 3 months correlation between Matco and Agha is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Matco Foods and Agha Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agha Steel Industries and Matco Foods 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 Matco Foods are associated (or correlated) with Agha Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agha Steel Industries has no effect on the direction of Matco Foods i.e., Matco Foods and Agha Steel go up and down completely randomly.

Pair Corralation between Matco Foods and Agha Steel

Assuming the 90 days trading horizon Matco Foods is expected to generate 1.64 times more return on investment than Agha Steel. However, Matco Foods is 1.64 times more volatile than Agha Steel Industries. It trades about 0.05 of its potential returns per unit of risk. Agha Steel Industries is currently generating about 0.06 per unit of risk. If you would invest  4,448  in Matco Foods on October 25, 2024 and sell it today you would earn a total of  114.00  from holding Matco Foods or generate 2.56% return on investment over 90 days.

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

Matco Foods  vs.  Agha Steel Industries

Matco Foods

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Matco Foods are ranked lower than 21 (%) 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.

Agha Steel Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agha Steel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Matco Foods and Agha Steel

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

The idea behind Matco Foods and Agha Steel Industries 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.