Correlation Between Metro and BRP
Can any of the company-specific risk be diversified away by investing in both Metro and BRP 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 and BRP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metro Inc and BRP Inc, you can compare the effects of market volatilities on Metro and BRP 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 with a short position of BRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro and BRP.
Diversification Opportunities for Metro and BRP
Very good diversification
The 3 months correlation between Metro and BRP is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Metro Inc and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc and Metro 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 Inc are associated (or correlated) with BRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRP Inc has no effect on the direction of Metro i.e., Metro and BRP go up and down completely randomly.
Pair Corralation between Metro and BRP
Assuming the 90 days trading horizon Metro Inc is expected to generate 0.45 times more return on investment than BRP. However, Metro Inc is 2.22 times less risky than BRP. It trades about 0.49 of its potential returns per unit of risk. BRP Inc is currently generating about -0.05 per unit of risk. If you would invest 8,294 in Metro Inc on September 3, 2024 and sell it today you would earn a total of 829.00 from holding Metro Inc or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metro Inc vs. BRP Inc
Performance |
| Timeline |
| Metro Inc |
| BRP Inc |
Metro and BRP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro and BRP
The main advantage of trading using opposite Metro and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro position performs unexpectedly, BRP 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 BRP will offset losses from the drop in BRP's long position.| 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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