Correlation Between Organic Meat and Matco Foods

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

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

Diversification Opportunities for Organic Meat and Matco Foods

-0.15

Correlation Coefficient

Organic Meat  Matco Foods

Good diversification

The 3 months correlation between Organic and Matco is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding The Organic Meat and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods and Organic Meat 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 The Organic Meat 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 Organic Meat i.e., Organic Meat and Matco Foods go up and down completely randomly.

Pair Corralation between Organic Meat and Matco Foods

Assuming the 90 days trading horizon The Organic Meat is expected to generate 0.59 times more return on investment than Matco Foods. However, The Organic Meat is 1.69 times less risky than Matco Foods. It trades about -0.03 of its potential returns per unit of risk. Matco Foods is currently generating about -0.07 per unit of risk. If you would invest  3,565  in The Organic Meat on December 30, 2024 and sell it today you would lose (166.00) from holding The Organic Meat or give up 4.66% of portfolio value over 90 days.

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

The Organic Meat  vs.  Matco Foods

Organic Meat

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Organic Meat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, Organic Meat is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional 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 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 Organic Meat and Matco Foods

The main advantage of trading using opposite Organic Meat and Matco Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Organic Meat 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 The Organic Meat 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.