Correlation Between Metro Retail and Bank of the

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

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

Diversification Opportunities for Metro Retail and Bank of the

-0.2

Correlation Coefficient

Metro Retail  Bank of the

Good diversification

The 3 months correlation between Metro and Bank is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Metro Retail Stores and Bank of the in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of the and Metro Retail 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 Retail Stores are associated (or correlated) with Bank of the. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of the has no effect on the direction of Metro Retail i.e., Metro Retail and Bank of the go up and down completely randomly.

Pair Corralation between Metro Retail and Bank of the

Assuming the 90 days trading horizon Metro Retail Stores is expected to under-perform the Bank of the. But the stock apears to be less risky and, when comparing its historical volatility, Metro Retail Stores is 1.3 times less risky than Bank of the. The stock trades about 0.0 of its potential returns per unit of risk. The Bank of the is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  12,455  in Bank of the on September 5, 2024 and sell it today you would earn a total of  315.00  from holding Bank of the or generate 2.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Metro Retail Stores  vs.  Bank of the

Metro Retail Stores

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro Retail Stores has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Metro Retail is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Bank of the

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of the are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Bank of the is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Metro Retail and Bank of the

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

The idea behind Metro Retail Stores and Bank of the 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.