Correlation Between Metro AG and REVO INSURANCE

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

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

Diversification Opportunities for Metro AG and REVO INSURANCE

-0.74

Correlation Coefficient

Metro AG  REVO INSURANCE

Pay attention - limited upside

The 3 months correlation between Metro and REVO is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Metro AG and REVO INSURANCE SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REVO INSURANCE SPA and Metro AG 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 AG are associated (or correlated) with REVO INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REVO INSURANCE SPA has no effect on the direction of Metro AG i.e., Metro AG and REVO INSURANCE go up and down completely randomly.

Pair Corralation between Metro AG and REVO INSURANCE

Assuming the 90 days trading horizon Metro AG is expected to under-perform the REVO INSURANCE. In addition to that, Metro AG is 1.31 times more volatile than REVO INSURANCE SPA. It trades about -0.08 of its total potential returns per unit of risk. REVO INSURANCE SPA is currently generating about 0.06 per unit of volatility. If you would invest  799.00  in REVO INSURANCE SPA on October 24, 2024 and sell it today you would earn a total of  316.00  from holding REVO INSURANCE SPA or generate 39.55% return on investment over 90 days.

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

Metro AG  vs.  REVO INSURANCE SPA

Metro AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

REVO INSURANCE SPA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in REVO INSURANCE SPA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, REVO INSURANCE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metro AG and REVO INSURANCE

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

The idea behind Metro AG and REVO INSURANCE SPA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.