Correlation Between Metro Investment and Nancal Energy

Can any of the company-specific risk be diversified away by investing in both Metro Investment and Nancal Energy 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 Nancal Energy 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 Nancal Energy Saving Tech, you can compare the effects of market volatilities on Metro Investment and Nancal Energy 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 Nancal Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Investment and Nancal Energy.

Diversification Opportunities for Metro Investment and Nancal Energy

0.59

Correlation Coefficient

Metro Investment  Nancal Energy

Very weak diversification

The 3 months correlation between Metro and Nancal is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Metro Investment Development and Nancal Energy Saving Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nancal Energy Saving 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 Nancal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nancal Energy Saving has no effect on the direction of Metro Investment i.e., Metro Investment and Nancal Energy go up and down completely randomly.

Pair Corralation between Metro Investment and Nancal Energy

Assuming the 90 days trading horizon Metro Investment Development is expected to generate 0.59 times more return on investment than Nancal Energy. However, Metro Investment Development is 1.68 times less risky than Nancal Energy. It trades about 0.05 of its potential returns per unit of risk. Nancal Energy Saving Tech is currently generating about 0.0 per unit of risk. If you would invest  404.00  in Metro Investment Development on September 1, 2024 and sell it today you would earn a total of  51.00  from holding Metro Investment Development or generate 12.62% return on investment over 90 days.

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

Metro Investment Development  vs.  Nancal Energy Saving Tech

Metro Investment Dev

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Investment Development are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Metro Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Nancal Energy Saving

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nancal Energy Saving Tech are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nancal Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metro Investment and Nancal Energy

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

The idea behind Metro Investment Development and Nancal Energy Saving Tech 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.