Correlation Between Sindh Modaraba and Matco Foods

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

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

Diversification Opportunities for Sindh Modaraba and Matco Foods

-0.16

Correlation Coefficient

Sindh Modaraba  Matco Foods

Good diversification

The 3 months correlation between Sindh and Matco is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sindh Modaraba Management and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods and Sindh Modaraba 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 Sindh Modaraba Management 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 Sindh Modaraba i.e., Sindh Modaraba and Matco Foods go up and down completely randomly.

Pair Corralation between Sindh Modaraba and Matco Foods

Assuming the 90 days trading horizon Sindh Modaraba Management is expected to generate 0.86 times more return on investment than Matco Foods. However, Sindh Modaraba Management is 1.16 times less risky than Matco Foods. It trades about 0.04 of its potential returns per unit of risk. Matco Foods is currently generating about -0.07 per unit of risk. If you would invest  1,015  in Sindh Modaraba Management on December 28, 2024 and sell it today you would earn a total of  55.00  from holding Sindh Modaraba Management or generate 5.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Sindh Modaraba Management  vs.  Matco Foods

Sindh Modaraba Management

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sindh Modaraba Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Sindh Modaraba may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Sindh Modaraba and Matco Foods

The main advantage of trading using opposite Sindh Modaraba and Matco Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sindh Modaraba 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 Sindh Modaraba Management 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.