Correlation Between Metro Investment and Beijing Mainstreets

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

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

Diversification Opportunities for Metro Investment and Beijing Mainstreets

0.08

Correlation Coefficient

Metro Investment  Beijing Mainstreets

Significant diversification

The 3 months correlation between Metro and Beijing is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Metro Investment Development and Beijing Mainstreets Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Mainstreets and Metro Investment 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 Investment Development are associated (or correlated) with Beijing Mainstreets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Mainstreets has no effect on the direction of Metro Investment i.e., Metro Investment and Beijing Mainstreets go up and down completely randomly.

Pair Corralation between Metro Investment and Beijing Mainstreets

Assuming the 90 days trading horizon Metro Investment Development is expected to generate 0.88 times more return on investment than Beijing Mainstreets. However, Metro Investment Development is 1.14 times less risky than Beijing Mainstreets. It trades about 0.01 of its potential returns per unit of risk. Beijing Mainstreets Investment is currently generating about -0.03 per unit of risk. If you would invest  458.00  in Metro Investment Development on October 7, 2024 and sell it today you would lose (62.00) from holding Metro Investment Development or give up 13.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Metro Investment Development  vs.  Beijing Mainstreets Investment

Metro Investment Dev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro Investment Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Beijing Mainstreets

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Mainstreets Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Mainstreets sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metro Investment and Beijing Mainstreets

The main advantage of trading using opposite Metro Investment and Beijing Mainstreets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Investment position performs unexpectedly, Beijing Mainstreets 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 Beijing Mainstreets will offset losses from the drop in Beijing Mainstreets' long position.

The idea behind Metro Investment Development and Beijing Mainstreets Investment 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.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.