Correlation Between Metro AG and US Foods

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

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

Diversification Opportunities for Metro AG and US Foods

-0.24

Correlation Coefficient

Metro AG  US Foods

Very good diversification

The 3 months correlation between Metro and UFH is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Metro AG and US Foods Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Foods Holding and Metro AG 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 Metro AG are associated (or correlated) with US Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Foods Holding has no effect on the direction of Metro AG i.e., Metro AG and US Foods go up and down completely randomly.

Pair Corralation between Metro AG and US Foods

Assuming the 90 days trading horizon Metro AG is expected to under-perform the US Foods. In addition to that, Metro AG is 1.7 times more volatile than US Foods Holding. It trades about -0.02 of its total potential returns per unit of risk. US Foods Holding is currently generating about 0.15 per unit of volatility. If you would invest  5,500  in US Foods Holding on September 23, 2024 and sell it today you would earn a total of  950.00  from holding US Foods Holding or generate 17.27% return on investment over 90 days.

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

Metro AG  vs.  US Foods Holding

Metro AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Metro AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

US Foods Holding

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Foods Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, US Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metro AG and US Foods

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

The idea behind Metro AG and US Foods Holding 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.