Correlation Between Metro and Empire Company
Can any of the company-specific risk be diversified away by investing in both Metro and Empire Company 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 Empire Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metro Inc and Empire Company Limited, you can compare the effects of market volatilities on Metro and Empire Company 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 Empire Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro and Empire Company.
Diversification Opportunities for Metro and Empire Company
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Metro and Empire is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Metro Inc and Empire Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Limited 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 Empire Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Limited has no effect on the direction of Metro i.e., Metro and Empire Company go up and down completely randomly.
Pair Corralation between Metro and Empire Company
Assuming the 90 days trading horizon Metro Inc is expected to generate 0.8 times more return on investment than Empire Company. However, Metro Inc is 1.26 times less risky than Empire Company. It trades about 0.14 of its potential returns per unit of risk. Empire Company Limited is currently generating about 0.07 per unit of risk. If you would invest 8,378 in Metro Inc on October 22, 2024 and sell it today you would earn a total of 681.00 from holding Metro Inc or generate 8.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metro Inc vs. Empire Company Limited
Performance |
| Timeline |
| Metro Inc |
| Empire Limited |
Metro and Empire Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro and Empire Company
The main advantage of trading using opposite Metro and Empire Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro position performs unexpectedly, Empire Company 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 Empire Company will offset losses from the drop in Empire Company's long position.| Metro vs. Loblaw Companies Limited | Metro vs. Saputo Inc | Metro vs. Empire Company Limited | Metro vs. Dollarama |
| Empire Company vs. Metro Inc | Empire Company vs. George Weston Limited | Empire Company vs. Saputo Inc | Empire Company vs. Loblaw Companies Limited |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |