Correlation Between MTY Food and GDI Integrated

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

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

Diversification Opportunities for MTY Food and GDI Integrated

-0.14

Correlation Coefficient

MTY Food  GDI Integrated

Good diversification

The 3 months correlation between MTY and GDI is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding MTY Food Group and GDI Integrated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GDI Integrated and MTY Food 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 MTY Food Group are associated (or correlated) with GDI Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GDI Integrated has no effect on the direction of MTY Food i.e., MTY Food and GDI Integrated go up and down completely randomly.

Pair Corralation between MTY Food and GDI Integrated

Assuming the 90 days trading horizon MTY Food Group is expected to generate 2.16 times more return on investment than GDI Integrated. However, MTY Food is 2.16 times more volatile than GDI Integrated. It trades about -0.02 of its potential returns per unit of risk. GDI Integrated is currently generating about -0.28 per unit of risk. If you would invest  4,843  in MTY Food Group on February 4, 2024 and sell it today you would lose (79.00) from holding MTY Food Group or give up 1.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

MTY Food Group  vs.  GDI Integrated

MTY Food Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTY Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

GDI Integrated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GDI Integrated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, GDI Integrated is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MTY Food and GDI Integrated

The main advantage of trading using opposite MTY Food and GDI Integrated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTY Food position performs unexpectedly, GDI Integrated 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 GDI Integrated will offset losses from the drop in GDI Integrated's long position.

The idea behind MTY Food Group and GDI Integrated 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.