Correlation Between FAST RETAIL and Metro AG

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

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

Diversification Opportunities for FAST RETAIL and Metro AG

0.13

Correlation Coefficient

FAST RETAIL  Metro AG

Average diversification

The 3 months correlation between FAST and Metro is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG and FAST RETAIL 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 FAST RETAIL ADR 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 FAST RETAIL i.e., FAST RETAIL and Metro AG go up and down completely randomly.

Pair Corralation between FAST RETAIL and Metro AG

Assuming the 90 days trading horizon FAST RETAIL ADR is expected to under-perform the Metro AG. But the stock apears to be less risky and, when comparing its historical volatility, FAST RETAIL ADR is 2.35 times less risky than Metro AG. The stock trades about -0.04 of its potential returns per unit of risk. The Metro AG is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  500.00  in Metro AG on October 25, 2024 and sell it today you would lose (18.00) from holding Metro AG or give up 3.6% of portfolio value over 90 days.

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

FAST RETAIL ADR  vs.  Metro AG

FAST RETAIL ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FAST RETAIL ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FAST RETAIL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with FAST RETAIL and Metro AG

The main advantage of trading using opposite FAST RETAIL and Metro AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAST RETAIL 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 FAST RETAIL ADR 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.