Correlation Between Quice Food and Matco Foods

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

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

Diversification Opportunities for Quice Food and Matco Foods

0.55

Correlation Coefficient

Quice Food  Matco Foods

Very weak diversification

The 3 months correlation between Quice and Matco is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Quice Food Industries and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods and Quice Food 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 Quice Food Industries are associated (or correlated) with Matco Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matco Foods has no effect on the direction of Quice Food i.e., Quice Food and Matco Foods go up and down completely randomly.

Pair Corralation between Quice Food and Matco Foods

Assuming the 90 days trading horizon Quice Food Industries is expected to generate 1.49 times more return on investment than Matco Foods. However, Quice Food is 1.49 times more volatile than Matco Foods. It trades about 0.06 of its potential returns per unit of risk. Matco Foods is currently generating about 0.06 per unit of risk. If you would invest  450.00  in Quice Food Industries on October 9, 2024 and sell it today you would earn a total of  200.00  from holding Quice Food Industries or generate 44.44% return on investment over 90 days.

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

Quice Food Industries  vs.  Matco Foods

Quice Food Industries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quice Food Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Quice Food disclosed solid returns over the last few months and may actually be approaching a breakup point.

Matco Foods

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Matco Foods are ranked lower than 21 (%) 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.

Pair Trading with Quice Food and Matco Foods

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

The idea behind Quice Food Industries and Matco Foods 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.