Correlation Between Matco Foods and Al Ghazi

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

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

Diversification Opportunities for Matco Foods and Al Ghazi

0.62

Correlation Coefficient

Matco Foods  Al Ghazi

Poor diversification

The 3 months correlation between Matco and AGTL is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Matco Foods and Al Ghazi Tractors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Al Ghazi Tractors 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 Al Ghazi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Al Ghazi Tractors has no effect on the direction of Matco Foods i.e., Matco Foods and Al Ghazi go up and down completely randomly.

Pair Corralation between Matco Foods and Al Ghazi

Assuming the 90 days trading horizon Matco Foods is expected to generate 1.16 times less return on investment than Al Ghazi. In addition to that, Matco Foods is 1.42 times more volatile than Al Ghazi Tractors. It trades about 0.11 of its total potential returns per unit of risk. Al Ghazi Tractors is currently generating about 0.18 per unit of volatility. If you would invest  35,500  in Al Ghazi Tractors on September 13, 2024 and sell it today you would earn a total of  18,502  from holding Al Ghazi Tractors or generate 52.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.18%
Values	Daily Returns

Matco Foods  vs.  Al Ghazi Tractors

Matco Foods

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Matco Foods are ranked lower than 17 (%) 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.

Al Ghazi Tractors

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Al Ghazi Tractors are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Al Ghazi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matco Foods and Al Ghazi

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

The idea behind Matco Foods and Al Ghazi Tractors 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.