Correlation Between Soneri Bank and Matco Foods

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

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

Diversification Opportunities for Soneri Bank and Matco Foods

0.34

Correlation Coefficient

Soneri Bank  Matco Foods

Weak diversification

The 3 months correlation between Soneri and Matco is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Soneri Bank and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods and Soneri Bank 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 Soneri Bank 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 Soneri Bank i.e., Soneri Bank and Matco Foods go up and down completely randomly.

Pair Corralation between Soneri Bank and Matco Foods

Assuming the 90 days trading horizon Soneri Bank is expected to generate 0.57 times more return on investment than Matco Foods. However, Soneri Bank is 1.74 times less risky than Matco Foods. It trades about 0.05 of its potential returns per unit of risk. Matco Foods is currently generating about -0.01 per unit of risk. If you would invest  1,544  in Soneri Bank on December 23, 2024 and sell it today you would earn a total of  73.00  from holding Soneri Bank or generate 4.73% return on investment over 90 days.

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

Soneri Bank  vs.  Matco Foods

Soneri Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Soneri Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Soneri Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 relatively invariable basic indicators, Matco Foods is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Soneri Bank and Matco Foods

The main advantage of trading using opposite Soneri Bank and Matco Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Soneri Bank 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 Soneri Bank 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.

Check out your portfolio center.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.