Correlation Between Metropolitan Steel and Unity Foods
Can any of the company-specific risk be diversified away by investing in both Metropolitan Steel and Unity Foods 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 Metropolitan Steel and Unity Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metropolitan Steel Corp and Unity Foods, you can compare the effects of market volatilities on Metropolitan Steel and Unity Foods 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 Metropolitan Steel with a short position of Unity Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan Steel and Unity Foods.
Diversification Opportunities for Metropolitan Steel and Unity Foods
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Metropolitan and Unity is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Steel Corp and Unity Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Foods and Metropolitan Steel 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 Metropolitan Steel Corp are associated (or correlated) with Unity Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unity Foods has no effect on the direction of Metropolitan Steel i.e., Metropolitan Steel and Unity Foods go up and down completely randomly.
Pair Corralation between Metropolitan Steel and Unity Foods
Assuming the 90 days trading horizon Metropolitan Steel Corp is expected to generate 1.08 times more return on investment than Unity Foods. However, Metropolitan Steel is 1.08 times more volatile than Unity Foods. It trades about -0.25 of its potential returns per unit of risk. Unity Foods is currently generating about -0.31 per unit of risk. If you would invest 1,090 in Metropolitan Steel Corp on November 8, 2024 and sell it today you would lose (97.00) from holding Metropolitan Steel Corp or give up 8.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metropolitan Steel Corp vs. Unity Foods
Performance |
| Timeline |
| Metropolitan Steel Corp |
| Unity Foods |
Metropolitan Steel and Unity Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan Steel and Unity Foods
The main advantage of trading using opposite Metropolitan Steel and Unity Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan Steel position performs unexpectedly, Unity Foods 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 Unity Foods will offset losses from the drop in Unity Foods' long position.| Metropolitan Steel vs. National Bank of | Metropolitan Steel vs. United Bank | Metropolitan Steel vs. Bank Alfalah | Metropolitan Steel vs. Allied Bank |
| Unity Foods vs. Matco Foods | Unity Foods vs. AKD Hospitality | Unity Foods vs. Beco Steel | Unity Foods vs. Mughal Iron Steel |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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