Correlation Between DAIRY FARM and Metro AG

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

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

Diversification Opportunities for DAIRY FARM and Metro AG

-0.26

Correlation Coefficient

DAIRY FARM  Metro AG

Very good diversification

The 3 months correlation between DAIRY and Metro is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG and DAIRY FARM 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 DAIRY FARM INTL are associated (or correlated) with Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of DAIRY FARM i.e., DAIRY FARM and Metro AG go up and down completely randomly.

Pair Corralation between DAIRY FARM and Metro AG

Assuming the 90 days trading horizon DAIRY FARM is expected to generate 1.85 times less return on investment than Metro AG. But when comparing it to its historical volatility, DAIRY FARM INTL is 1.83 times less risky than Metro AG. It trades about 0.06 of its potential returns per unit of risk. Metro AG is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  482.00  in Metro AG on December 29, 2024 and sell it today you would earn a total of  53.00  from holding Metro AG or generate 11.0% return on investment over 90 days.

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

DAIRY FARM INTL  vs.  Metro AG

DAIRY FARM INTL

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DAIRY FARM INTL are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, DAIRY FARM may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Metro AG

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Metro AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Metro AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DAIRY FARM and Metro AG

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

The idea behind DAIRY FARM INTL and Metro AG 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.