Correlation Between Metro and Restaurant Brands
Can any of the company-specific risk be diversified away by investing in both Metro and Restaurant Brands 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 Restaurant Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metro Inc and Restaurant Brands International, you can compare the effects of market volatilities on Metro and Restaurant Brands 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 Restaurant Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro and Restaurant Brands.
Diversification Opportunities for Metro and Restaurant Brands
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Metro and Restaurant is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Metro Inc and Restaurant Brands Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Restaurant Brands 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 Restaurant Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Restaurant Brands has no effect on the direction of Metro i.e., Metro and Restaurant Brands go up and down completely randomly.
Pair Corralation between Metro and Restaurant Brands
Assuming the 90 days trading horizon Metro Inc is expected to generate 0.66 times more return on investment than Restaurant Brands. However, Metro Inc is 1.52 times less risky than Restaurant Brands. It trades about 0.15 of its potential returns per unit of risk. Restaurant Brands International is currently generating about -0.02 per unit of risk. If you would invest 7,175 in Metro Inc on September 1, 2024 and sell it today you would earn a total of 1,948 from holding Metro Inc or generate 27.15% 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. Restaurant Brands Internationa
Performance |
| Timeline |
| Metro Inc |
| Restaurant Brands |
Metro and Restaurant Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro and Restaurant Brands
The main advantage of trading using opposite Metro and Restaurant Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro position performs unexpectedly, Restaurant Brands 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 Restaurant Brands will offset losses from the drop in Restaurant Brands' long position.| Metro vs. Loblaw Companies Limited | Metro vs. Saputo Inc | Metro vs. Empire Company Limited | Metro vs. Dollarama |
| Restaurant Brands vs. Restaurant Brands International | Restaurant Brands vs. Enghouse Systems | Restaurant Brands vs. Metro Inc | Restaurant Brands vs. BRP 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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