Correlation Between Generic Engineering and Metropolis Healthcare

Can any of the company-specific risk be diversified away by investing in both Generic Engineering and Metropolis Healthcare 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 Generic Engineering and Metropolis Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Generic Engineering Construction and Metropolis Healthcare Limited, you can compare the effects of market volatilities on Generic Engineering and Metropolis Healthcare 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 Generic Engineering with a short position of Metropolis Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Generic Engineering and Metropolis Healthcare.

Diversification Opportunities for Generic Engineering and Metropolis Healthcare

0.3

Correlation Coefficient

Generic Engineering  Metropolis Healthcare

Weak diversification

The 3 months correlation between Generic and Metropolis is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Generic Engineering Constructi and Metropolis Healthcare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolis Healthcare and Generic Engineering 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 Generic Engineering Construction are associated (or correlated) with Metropolis Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolis Healthcare has no effect on the direction of Generic Engineering i.e., Generic Engineering and Metropolis Healthcare go up and down completely randomly.

Pair Corralation between Generic Engineering and Metropolis Healthcare

Assuming the 90 days trading horizon Generic Engineering Construction is expected to under-perform the Metropolis Healthcare. In addition to that, Generic Engineering is 1.53 times more volatile than Metropolis Healthcare Limited. It trades about -0.05 of its total potential returns per unit of risk. Metropolis Healthcare Limited is currently generating about -0.02 per unit of volatility. If you would invest  215,000  in Metropolis Healthcare Limited on September 5, 2024 and sell it today you would lose (7,365) from holding Metropolis Healthcare Limited or give up 3.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Generic Engineering Constructi  vs.  Metropolis Healthcare Limited

Generic Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Generic Engineering Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Metropolis Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metropolis Healthcare Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Metropolis Healthcare is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Generic Engineering and Metropolis Healthcare

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

The idea behind Generic Engineering Construction and Metropolis Healthcare Limited 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.