Correlation Between Metro AG and DISTRICT METALS

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

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

Diversification Opportunities for Metro AG and DISTRICT METALS

-0.51

Correlation Coefficient

Metro AG  DISTRICT METALS

Excellent diversification

The 3 months correlation between Metro and DISTRICT is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Metro AG and DISTRICT METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DISTRICT METALS 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 DISTRICT METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DISTRICT METALS has no effect on the direction of Metro AG i.e., Metro AG and DISTRICT METALS go up and down completely randomly.

Pair Corralation between Metro AG and DISTRICT METALS

Assuming the 90 days trading horizon Metro AG is expected to generate 0.84 times more return on investment than DISTRICT METALS. However, Metro AG is 1.19 times less risky than DISTRICT METALS. It trades about 0.12 of its potential returns per unit of risk. DISTRICT METALS is currently generating about -0.14 per unit of risk. If you would invest  496.00  in Metro AG on December 5, 2024 and sell it today you would earn a total of  39.00  from holding Metro AG or generate 7.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Metro AG  vs.  DISTRICT METALS

Metro AG

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Metro AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental drivers, Metro AG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

DISTRICT METALS

Risk-Adjusted Performance

Very Weak

Over the last 90 days DISTRICT METALS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DISTRICT METALS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Metro AG and DISTRICT METALS

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

The idea behind Metro AG and DISTRICT METALS 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.