Correlation Between Metro Retail and Megawide Construction

Can any of the company-specific risk be diversified away by investing in both Metro Retail and Megawide Construction 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 Megawide Construction 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 Megawide Construction Corp, you can compare the effects of market volatilities on Metro Retail and Megawide Construction 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 Megawide Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Retail and Megawide Construction.

Diversification Opportunities for Metro Retail and Megawide Construction

0.35

Correlation Coefficient

Metro Retail  Megawide Construction

Weak diversification

The 3 months correlation between Metro and Megawide is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Metro Retail Stores and Megawide Construction Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megawide Construction 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 Megawide Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megawide Construction has no effect on the direction of Metro Retail i.e., Metro Retail and Megawide Construction go up and down completely randomly.

Pair Corralation between Metro Retail and Megawide Construction

Assuming the 90 days trading horizon Metro Retail Stores is expected to under-perform the Megawide Construction. But the stock apears to be less risky and, when comparing its historical volatility, Metro Retail Stores is 1.44 times less risky than Megawide Construction. The stock trades about 0.0 of its potential returns per unit of risk. The Megawide Construction Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  8,820  in Megawide Construction Corp on September 14, 2024 and sell it today you would earn a total of  970.00  from holding Megawide Construction Corp or generate 11.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	44.3%
Values	Daily Returns

Metro Retail Stores  vs.  Megawide Construction Corp

Metro Retail Stores

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Retail Stores are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Megawide Construction

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Megawide Construction Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Megawide Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metro Retail and Megawide Construction

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

The idea behind Metro Retail Stores and Megawide Construction Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.