Correlation Between Matco Foods and JS Investments

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

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

Diversification Opportunities for Matco Foods and JS Investments

-0.27

Correlation Coefficient

Matco Foods  JS Investments

Very good diversification

The 3 months correlation between Matco and JSIL is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Matco Foods and JS Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JS Investments 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 JS Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JS Investments has no effect on the direction of Matco Foods i.e., Matco Foods and JS Investments go up and down completely randomly.

Pair Corralation between Matco Foods and JS Investments

Assuming the 90 days trading horizon Matco Foods is expected to generate 1.13 times more return on investment than JS Investments. However, Matco Foods is 1.13 times more volatile than JS Investments. It trades about 0.16 of its potential returns per unit of risk. JS Investments is currently generating about -0.02 per unit of risk. If you would invest  3,086  in Matco Foods on December 4, 2024 and sell it today you would earn a total of  1,296  from holding Matco Foods or generate 42.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Matco Foods  vs.  JS Investments

Matco Foods

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Matco Foods are ranked lower than 12 (%) 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.

JS Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days JS Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, JS Investments 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 JS Investments

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

The idea behind Matco Foods and JS Investments 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.