Correlation Between Dollarama and Metro
Can any of the company-specific risk be diversified away by investing in both Dollarama and Metro 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 Dollarama and Metro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dollarama and Metro Inc, you can compare the effects of market volatilities on Dollarama and Metro 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 Dollarama with a short position of Metro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dollarama and Metro.
Diversification Opportunities for Dollarama and Metro
Modest diversification
The 3 months correlation between Dollarama and Metro is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Dollarama and Metro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Inc and Dollarama 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 Dollarama are associated (or correlated) with Metro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Inc has no effect on the direction of Dollarama i.e., Dollarama and Metro go up and down completely randomly.
Pair Corralation between Dollarama and Metro
Assuming the 90 days trading horizon Dollarama is expected to under-perform the Metro. In addition to that, Dollarama is 1.27 times more volatile than Metro Inc. It trades about -0.01 of its total potential returns per unit of risk. Metro Inc is currently generating about 0.41 per unit of volatility. If you would invest 8,240 in Metro Inc on August 27, 2024 and sell it today you would earn a total of 722.00 from holding Metro Inc or generate 8.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dollarama vs. Metro Inc
Performance |
| Timeline |
| Dollarama |
| Metro Inc |
Dollarama and Metro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dollarama and Metro
The main advantage of trading using opposite Dollarama and Metro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dollarama position performs unexpectedly, Metro 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 will offset losses from the drop in Metro's long position.| Dollarama vs. Chatham Rock Phosphate | Dollarama vs. Alaska Energy Metals | Dollarama vs. Elixxer | Dollarama vs. Cielo Waste Solutions |
| Metro vs. Loblaw Companies Limited | Metro vs. Saputo Inc | Metro vs. Empire Company Limited | Metro vs. Dollarama |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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