Correlation Between TRAVEL LEISURE and Metro AG
Can any of the company-specific risk be diversified away by investing in both TRAVEL LEISURE and Metro AG 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 TRAVEL LEISURE and Metro AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TRAVEL LEISURE DL 01 and Metro AG, you can compare the effects of market volatilities on TRAVEL LEISURE and Metro AG 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 TRAVEL LEISURE with a short position of Metro AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRAVEL LEISURE and Metro AG.
Diversification Opportunities for TRAVEL LEISURE and Metro AG
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between TRAVEL and Metro is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding TRAVEL LEISURE DL 01 and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG and TRAVEL LEISURE 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 TRAVEL LEISURE DL 01 are associated (or correlated) with Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of TRAVEL LEISURE i.e., TRAVEL LEISURE and Metro AG go up and down completely randomly.
Pair Corralation between TRAVEL LEISURE and Metro AG
Assuming the 90 days trading horizon TRAVEL LEISURE DL 01 is expected to under-perform the Metro AG. But the stock apears to be less risky and, when comparing its historical volatility, TRAVEL LEISURE DL 01 is 2.39 times less risky than Metro AG. The stock trades about -0.32 of its potential returns per unit of risk. The Metro AG is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 432.00 in Metro AG on September 28, 2024 and sell it today you would lose (28.00) from holding Metro AG or give up 6.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TRAVEL LEISURE DL 01 vs. Metro AG
Performance |
| Timeline |
| TRAVEL LEISURE DL |
| Metro AG |
TRAVEL LEISURE and Metro AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TRAVEL LEISURE and Metro AG
The main advantage of trading using opposite TRAVEL LEISURE and Metro AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAVEL LEISURE position performs unexpectedly, Metro AG 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 Metro AG will offset losses from the drop in Metro AG's long position.| TRAVEL LEISURE vs. TRIPCOM GROUP DL 00125 | TRAVEL LEISURE vs. TUI AG | TRAVEL LEISURE vs. TripAdvisor | TRAVEL LEISURE vs. MakeMyTrip Limited |
| Metro AG vs. Universal Display | Metro AG vs. Jupiter Fund Management | Metro AG vs. CEOTRONICS | Metro AG vs. TRAVEL LEISURE DL 01 |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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