Correlation Between Metro and Leafly Holdings
Can any of the company-specific risk be diversified away by investing in both Metro and Leafly Holdings 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 Leafly Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metro Inc and Leafly Holdings, you can compare the effects of market volatilities on Metro and Leafly Holdings 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 Leafly Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro and Leafly Holdings.
Diversification Opportunities for Metro and Leafly Holdings
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Metro and Leafly is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Metro Inc and Leafly Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leafly Holdings 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 Leafly Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leafly Holdings has no effect on the direction of Metro i.e., Metro and Leafly Holdings go up and down completely randomly.
Pair Corralation between Metro and Leafly Holdings
Assuming the 90 days trading horizon Metro is expected to generate 69.74 times less return on investment than Leafly Holdings. But when comparing it to its historical volatility, Metro Inc is 115.39 times less risky than Leafly Holdings. It trades about 0.19 of its potential returns per unit of risk. Leafly Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2.27 in Leafly Holdings on August 28, 2024 and sell it today you would earn a total of 0.31 from holding Leafly Holdings or generate 13.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.16% |
| Values | Daily Returns |
Metro Inc vs. Leafly Holdings
Performance |
| Timeline |
| Metro Inc |
| Leafly Holdings |
Metro and Leafly Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro and Leafly Holdings
The main advantage of trading using opposite Metro and Leafly Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro position performs unexpectedly, Leafly Holdings 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 Leafly Holdings will offset losses from the drop in Leafly Holdings' long position.| Metro vs. Loblaw Companies Limited | Metro vs. Saputo Inc | Metro vs. Empire Company Limited | Metro vs. Dollarama |
| Leafly Holdings vs. Leafly Holdings | Leafly Holdings vs. WM Technology | Leafly Holdings vs. Revelation Biosciences | Leafly Holdings vs. AEye Inc |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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