Correlation Between Jernimo Martins and Metro AG

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

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

Diversification Opportunities for Jernimo Martins and Metro AG

-0.16

Correlation Coefficient

Jernimo Martins  Metro AG

Good diversification

The 3 months correlation between Jernimo and Metro is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Jernimo Martins SGPS and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG and Jernimo Martins 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 Jernimo Martins SGPS are associated (or correlated) with Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of Jernimo Martins i.e., Jernimo Martins and Metro AG go up and down completely randomly.

Pair Corralation between Jernimo Martins and Metro AG

Assuming the 90 days horizon Jernimo Martins SGPS is expected to generate 0.56 times more return on investment than Metro AG. However, Jernimo Martins SGPS is 1.78 times less risky than Metro AG. It trades about 0.08 of its potential returns per unit of risk. Metro AG is currently generating about -0.01 per unit of risk. If you would invest  1,655  in Jernimo Martins SGPS on September 23, 2024 and sell it today you would earn a total of  150.00  from holding Jernimo Martins SGPS or generate 9.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.3%
Values	Daily Returns

Jernimo Martins SGPS  vs.  Metro AG

Jernimo Martins SGPS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jernimo Martins SGPS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Jernimo Martins may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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. In spite of rather sound basic indicators, Metro AG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Jernimo Martins and Metro AG

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

The idea behind Jernimo Martins SGPS and Metro AG 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.