Correlation Between Guru Organic and Metro

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

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

Diversification Opportunities for Guru Organic and Metro

-0.19

Correlation Coefficient

Guru Organic  Metro

Good diversification

The 3 months correlation between Guru and Metro is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Guru Organic Energy and Metro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Inc and Guru Organic 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 Guru Organic Energy are associated (or correlated) with Metro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Inc has no effect on the direction of Guru Organic i.e., Guru Organic and Metro go up and down completely randomly.

Pair Corralation between Guru Organic and Metro

Assuming the 90 days trading horizon Guru Organic Energy is expected to under-perform the Metro. In addition to that, Guru Organic is 5.95 times more volatile than Metro Inc. It trades about -0.04 of its total potential returns per unit of risk. Metro Inc is currently generating about 0.02 per unit of volatility. If you would invest  8,973  in Metro Inc on October 23, 2024 and sell it today you would earn a total of  35.00  from holding Metro Inc or generate 0.39% return on investment over 90 days.

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

Guru Organic Energy  vs.  Metro Inc

Guru Organic Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guru Organic Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Metro Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Metro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Guru Organic and Metro

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

The idea behind Guru Organic Energy and Metro Inc 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.