Correlation Between Matco Foods and ITTEFAQ Iron

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

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

Diversification Opportunities for Matco Foods and ITTEFAQ Iron

0.81

Correlation Coefficient

Matco Foods  ITTEFAQ Iron

Very poor diversification

The 3 months correlation between Matco and ITTEFAQ is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Matco Foods and ITTEFAQ Iron Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITTEFAQ Iron 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 ITTEFAQ Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITTEFAQ Iron Industries has no effect on the direction of Matco Foods i.e., Matco Foods and ITTEFAQ Iron go up and down completely randomly.

Pair Corralation between Matco Foods and ITTEFAQ Iron

Assuming the 90 days trading horizon Matco Foods is expected to generate 0.91 times more return on investment than ITTEFAQ Iron. However, Matco Foods is 1.1 times less risky than ITTEFAQ Iron. It trades about 0.27 of its potential returns per unit of risk. ITTEFAQ Iron Industries is currently generating about 0.15 per unit of risk. If you would invest  2,391  in Matco Foods on October 24, 2024 and sell it today you would earn a total of  2,185  from holding Matco Foods or generate 91.38% return on investment over 90 days.

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

Matco Foods  vs.  ITTEFAQ Iron Industries

Matco Foods

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Matco Foods are ranked lower than 20 (%) 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.

ITTEFAQ Iron Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ITTEFAQ Iron Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, ITTEFAQ Iron reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matco Foods and ITTEFAQ Iron

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

The idea behind Matco Foods and ITTEFAQ Iron 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.