Correlation Between Shaheen Insurance and Matco Foods

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

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

Diversification Opportunities for Shaheen Insurance and Matco Foods

0.9

Correlation Coefficient

Shaheen Insurance  Matco Foods

Almost no diversification

The 3 months correlation between Shaheen and Matco is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Shaheen Insurance and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods and Shaheen Insurance 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 Shaheen Insurance 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 Shaheen Insurance i.e., Shaheen Insurance and Matco Foods go up and down completely randomly.

Pair Corralation between Shaheen Insurance and Matco Foods

Assuming the 90 days trading horizon Shaheen Insurance is expected to generate 1.62 times more return on investment than Matco Foods. However, Shaheen Insurance is 1.62 times more volatile than Matco Foods. It trades about 0.07 of its potential returns per unit of risk. Matco Foods is currently generating about 0.04 per unit of risk. If you would invest  291.00  in Shaheen Insurance on October 11, 2024 and sell it today you would earn a total of  394.00  from holding Shaheen Insurance or generate 135.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	83.48%
Values	Daily Returns

Shaheen Insurance  vs.  Matco Foods

Shaheen Insurance

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shaheen Insurance are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Shaheen Insurance sustained 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 weak basic indicators, Matco Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shaheen Insurance and Matco Foods

The main advantage of trading using opposite Shaheen Insurance and Matco Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shaheen Insurance 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 Shaheen Insurance 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.