Correlation Between DL Industries and Metro Retail

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

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

Diversification Opportunities for DL Industries and Metro Retail

-0.46

Correlation Coefficient

DL Industries  Metro Retail

Very good diversification

The 3 months correlation between DNL and Metro is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding DL Industries and Metro Retail Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Retail Stores and DL Industries 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 DL Industries are associated (or correlated) with Metro Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Retail Stores has no effect on the direction of DL Industries i.e., DL Industries and Metro Retail go up and down completely randomly.

Pair Corralation between DL Industries and Metro Retail

Assuming the 90 days trading horizon DL Industries is expected to under-perform the Metro Retail. But the stock apears to be less risky and, when comparing its historical volatility, DL Industries is 1.56 times less risky than Metro Retail. The stock trades about -0.14 of its potential returns per unit of risk. The Metro Retail Stores is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  120.00  in Metro Retail Stores on December 21, 2024 and sell it today you would earn a total of  9.00  from holding Metro Retail Stores or generate 7.5% return on investment over 90 days.

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

DL Industries  vs.  Metro Retail Stores

DL Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days DL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Metro Retail Stores

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Retail Stores are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Metro Retail may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with DL Industries and Metro Retail

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

The idea behind DL Industries and Metro Retail Stores 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 Anywhere module to track or share privately all of your investments from the convenience of any device.