Correlation Between Matco Foods and Habib Sugar

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Can any of the company-specific risk be diversified away by investing in both Matco Foods and Habib Sugar 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 Habib Sugar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matco Foods and Habib Sugar Mills, you can compare the effects of market volatilities on Matco Foods and Habib Sugar 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 Habib Sugar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matco Foods and Habib Sugar.

Diversification Opportunities for Matco Foods and Habib Sugar

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Matco and Habib is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Matco Foods and Habib Sugar Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Habib Sugar Mills 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 Habib Sugar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Habib Sugar Mills has no effect on the direction of Matco Foods i.e., Matco Foods and Habib Sugar go up and down completely randomly.

Pair Corralation between Matco Foods and Habib Sugar

Assuming the 90 days trading horizon Matco Foods is expected to generate 1.86 times more return on investment than Habib Sugar. However, Matco Foods is 1.86 times more volatile than Habib Sugar Mills. It trades about 0.48 of its potential returns per unit of risk. Habib Sugar Mills is currently generating about -0.25 per unit of risk. If you would invest  3,203  in Matco Foods on October 6, 2024 and sell it today you would earn a total of  1,579  from holding Matco Foods or generate 49.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

Matco Foods  vs.  Habib Sugar Mills

 Performance 
       Timeline  
Matco Foods 

Risk-Adjusted Performance

24 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Matco Foods are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Matco Foods reported solid returns over the last few months and may actually be approaching a breakup point.
Habib Sugar Mills 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Habib Sugar Mills are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Habib Sugar disclosed solid returns over the last few months and may actually be approaching a breakup point.

Matco Foods and Habib Sugar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Matco Foods and Habib Sugar

The main advantage of trading using opposite Matco Foods and Habib Sugar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matco Foods position performs unexpectedly, Habib Sugar 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 Habib Sugar will offset losses from the drop in Habib Sugar's long position.
The idea behind Matco Foods and Habib Sugar Mills 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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