Correlation Between GEAR4MUSIC (HLDGS) and Metro AG

Can any of the company-specific risk be diversified away by investing in both GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC (HLDGS) and Metro AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GEAR4MUSIC LS 10 and Metro AG, you can compare the effects of market volatilities on GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC (HLDGS) with a short position of Metro AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEAR4MUSIC (HLDGS) and Metro AG.

Diversification Opportunities for GEAR4MUSIC (HLDGS) and Metro AG

-0.5

Correlation Coefficient

GEAR4MUSIC (HLDGS)  Metro AG

Very good diversification

The 3 months correlation between GEAR4MUSIC and Metro is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding GEAR4MUSIC LS 10 and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG and GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC LS 10 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 GEAR4MUSIC (HLDGS) i.e., GEAR4MUSIC (HLDGS) and Metro AG go up and down completely randomly.

Pair Corralation between GEAR4MUSIC (HLDGS) and Metro AG

Assuming the 90 days horizon GEAR4MUSIC LS 10 is expected to under-perform the Metro AG. But the stock apears to be less risky and, when comparing its historical volatility, GEAR4MUSIC LS 10 is 1.74 times less risky than Metro AG. The stock trades about -0.12 of its potential returns per unit of risk. The Metro AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  395.00  in Metro AG on December 22, 2024 and sell it today you would earn a total of  139.00  from holding Metro AG or generate 35.19% return on investment over 90 days.

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

GEAR4MUSIC LS 10  vs.  Metro AG

GEAR4MUSIC (HLDGS)

Risk-Adjusted Performance

Very Weak

Over the last 90 days GEAR4MUSIC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Metro AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metro AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, Metro AG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GEAR4MUSIC (HLDGS) and Metro AG

The main advantage of trading using opposite GEAR4MUSIC (HLDGS) and Metro AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC LS 10 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.