Correlation Between Matco Foods and Honda Atlas

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

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

Diversification Opportunities for Matco Foods and Honda Atlas

-0.06

Correlation Coefficient

Matco Foods  Honda Atlas

Good diversification

The 3 months correlation between Matco and Honda is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Matco Foods and Honda Atlas Cars in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Atlas Cars 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 Honda Atlas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honda Atlas Cars has no effect on the direction of Matco Foods i.e., Matco Foods and Honda Atlas go up and down completely randomly.

Pair Corralation between Matco Foods and Honda Atlas

Assuming the 90 days trading horizon Matco Foods is expected to generate 2.05 times more return on investment than Honda Atlas. However, Matco Foods is 2.05 times more volatile than Honda Atlas Cars. It trades about -0.01 of its potential returns per unit of risk. Honda Atlas Cars is currently generating about -0.05 per unit of risk. If you would invest  4,598  in Matco Foods on December 22, 2024 and sell it today you would lose (280.00) from holding Matco Foods or give up 6.09% of portfolio value over 90 days.

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

Matco Foods  vs.  Honda Atlas Cars

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 relatively invariable basic indicators, Matco Foods is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Honda Atlas Cars

Risk-Adjusted Performance

Very Weak

Over the last 90 days Honda Atlas Cars has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Honda Atlas is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Matco Foods and Honda Atlas

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

The idea behind Matco Foods and Honda Atlas Cars 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.