Correlation Between Unity Foods and Matco Foods

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

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

Diversification Opportunities for Unity Foods and Matco Foods

-0.06

Correlation Coefficient

Unity Foods  Matco Foods

Good diversification

The 3 months correlation between Unity and Matco is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Unity Foods and Matco Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matco Foods and Unity Foods 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 Unity Foods 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 Unity Foods i.e., Unity Foods and Matco Foods go up and down completely randomly.

Pair Corralation between Unity Foods and Matco Foods

Assuming the 90 days trading horizon Unity Foods is expected to under-perform the Matco Foods. But the stock apears to be less risky and, when comparing its historical volatility, Unity Foods is 2.34 times less risky than Matco Foods. The stock trades about -0.18 of its potential returns per unit of risk. The Matco Foods is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,598  in Matco Foods on December 22, 2024 and sell it today you would lose (280.00) from holding Matco Foods or give up 6.09% of portfolio value over 90 days.

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

Unity Foods  vs.  Matco Foods

Unity Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Unity Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company 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 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 Unity Foods and Matco Foods

The main advantage of trading using opposite Unity Foods and Matco Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unity Foods 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 Unity Foods 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.