Correlation Between PLAYMATES TOYS and Metro AG

Can any of the company-specific risk be diversified away by investing in both PLAYMATES TOYS 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 PLAYMATES TOYS and Metro AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PLAYMATES TOYS and Metro AG, you can compare the effects of market volatilities on PLAYMATES TOYS 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 PLAYMATES TOYS with a short position of Metro AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLAYMATES TOYS and Metro AG.

Diversification Opportunities for PLAYMATES TOYS and Metro AG

-0.39

Correlation Coefficient

PLAYMATES TOYS  Metro AG

Very good diversification

The 3 months correlation between PLAYMATES and Metro is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding PLAYMATES TOYS and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG and PLAYMATES TOYS 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 PLAYMATES TOYS 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 PLAYMATES TOYS i.e., PLAYMATES TOYS and Metro AG go up and down completely randomly.

Pair Corralation between PLAYMATES TOYS and Metro AG

Assuming the 90 days trading horizon PLAYMATES TOYS is expected to generate 17.88 times less return on investment than Metro AG. In addition to that, PLAYMATES TOYS is 1.32 times more volatile than Metro AG. It trades about 0.0 of its total potential returns per unit of risk. Metro AG is currently generating about 0.06 per unit of volatility. If you would invest  496.00  in Metro AG on December 25, 2024 and sell it today you would earn a total of  44.00  from holding Metro AG or generate 8.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.67%
Values	Daily Returns

PLAYMATES TOYS  vs.  Metro AG

PLAYMATES TOYS

Risk-Adjusted Performance

Very Weak

Over the last 90 days PLAYMATES TOYS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PLAYMATES TOYS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Metro AG

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Metro AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Metro AG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PLAYMATES TOYS and Metro AG

The main advantage of trading using opposite PLAYMATES TOYS and Metro AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PLAYMATES TOYS 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.

The idea behind PLAYMATES TOYS and Metro AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.