Correlation Between Metro AG and Jernimo Martins

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

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

Diversification Opportunities for Metro AG and Jernimo Martins

-0.32

Correlation Coefficient

Metro AG  Jernimo Martins

Very good diversification

The 3 months correlation between Metro and Jernimo is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Metro AG and Jernimo Martins SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jernimo Martins SGPS 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 Jernimo Martins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jernimo Martins SGPS has no effect on the direction of Metro AG i.e., Metro AG and Jernimo Martins go up and down completely randomly.

Pair Corralation between Metro AG and Jernimo Martins

Assuming the 90 days trading horizon Metro AG is expected to generate 1.26 times more return on investment than Jernimo Martins. However, Metro AG is 1.26 times more volatile than Jernimo Martins SGPS. It trades about -0.01 of its potential returns per unit of risk. Jernimo Martins SGPS is currently generating about -0.01 per unit of risk. If you would invest  520.00  in Metro AG on September 23, 2024 and sell it today you would lose (36.00) from holding Metro AG or give up 6.92% of portfolio value over 90 days.

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

Metro AG  vs.  Jernimo Martins SGPS

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. Despite nearly stable fundamental drivers, Metro AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Jernimo Martins SGPS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jernimo Martins SGPS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Jernimo Martins may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Metro AG and Jernimo Martins

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

The idea behind Metro AG and Jernimo Martins SGPS 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.