Correlation Between Matco Foods and Metropolitan Steel

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

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

Diversification Opportunities for Matco Foods and Metropolitan Steel

0.0

Correlation Coefficient

Matco Foods  Metropolitan Steel

Pay attention - limited upside

The 3 months correlation between Matco and Metropolitan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Matco Foods and Metropolitan Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan Steel Corp 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 Metropolitan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan Steel Corp has no effect on the direction of Matco Foods i.e., Matco Foods and Metropolitan Steel go up and down completely randomly.

Pair Corralation between Matco Foods and Metropolitan Steel

Assuming the 90 days trading horizon Matco Foods is expected to under-perform the Metropolitan Steel. In addition to that, Matco Foods is 1.53 times more volatile than Metropolitan Steel Corp. It trades about -0.04 of its total potential returns per unit of risk. Metropolitan Steel Corp is currently generating about -0.05 per unit of volatility. If you would invest  1,063  in Metropolitan Steel Corp on December 26, 2024 and sell it today you would lose (84.00) from holding Metropolitan Steel Corp or give up 7.9% of portfolio value over 90 days.

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

Matco Foods  vs.  Metropolitan Steel Corp

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 latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Metropolitan Steel Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metropolitan Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Matco Foods and Metropolitan Steel

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

The idea behind Matco Foods and Metropolitan Steel Corp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.