Correlation Between Bank of the and Metro Retail

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Can any of the company-specific risk be diversified away by investing in both Bank of the and Metro Retail 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 Bank of the and Metro Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of the and Metro Retail Stores, you can compare the effects of market volatilities on Bank of the and Metro Retail 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 Bank of the with a short position of Metro Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of the and Metro Retail.

Diversification Opportunities for Bank of the and Metro Retail

BankMetroDiversified AwayBankMetroDiversified Away100%
-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between Bank and Metro is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bank of the and Metro Retail Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Retail Stores and Bank of the 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 Bank of the are associated (or correlated) with Metro Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Retail Stores has no effect on the direction of Bank of the i.e., Bank of the and Metro Retail go up and down completely randomly.

Pair Corralation between Bank of the and Metro Retail

Assuming the 90 days trading horizon Bank of the is expected to generate 0.89 times more return on investment than Metro Retail. However, Bank of the is 1.12 times less risky than Metro Retail. It trades about 0.05 of its potential returns per unit of risk. Metro Retail Stores is currently generating about 0.01 per unit of risk. If you would invest  9,332  in Bank of the on November 26, 2024 and sell it today you would earn a total of  3,718  from holding Bank of the or generate 39.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy96.67%
ValuesDaily Returns

Bank of the  vs.  Metro Retail Stores

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-50
JavaScript chart by amCharts 3.21.15BPI MRSGI
       Timeline  
Bank of the 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Bank of the has generated negative risk-adjusted returns adding no value to investors with long positions. 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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb120125130135
Metro Retail Stores 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Metro Retail Stores are ranked lower than 4 (%) 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 newest stock price agitation, may contribute to short-term losses for the retail investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1.161.181.21.221.24

Bank of the and Metro Retail Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.08-2.31-1.53-0.76-0.01260.721.482.232.993.75 0.040.060.080.100.120.140.160.18
JavaScript chart by amCharts 3.21.15BPI MRSGI
       Returns  

Pair Trading with Bank of the and Metro Retail

The main advantage of trading using opposite Bank of the and Metro Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of the position performs unexpectedly, Metro Retail 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 Retail will offset losses from the drop in Metro Retail's long position.
The idea behind Bank of the and Metro Retail Stores 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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