Correlation Between Metro Retail and Asia United

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

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

Diversification Opportunities for Metro Retail and Asia United

0.6

Correlation Coefficient

Metro Retail  Asia United

Poor diversification

The 3 months correlation between Metro and Asia is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Metro Retail Stores and Asia United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia United Bank and Metro 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 Metro Retail Stores are associated (or correlated) with Asia United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia United Bank has no effect on the direction of Metro Retail i.e., Metro Retail and Asia United go up and down completely randomly.

Pair Corralation between Metro Retail and Asia United

Assuming the 90 days trading horizon Metro Retail Stores is expected to generate 0.77 times more return on investment than Asia United. However, Metro Retail Stores is 1.3 times less risky than Asia United. It trades about 0.0 of its potential returns per unit of risk. Asia United Bank is currently generating about -0.04 per unit of risk. If you would invest  120.00  in Metro Retail Stores on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Metro Retail Stores or generate 0.0% return on investment over 90 days.

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

Metro Retail Stores  vs.  Asia United Bank

Metro Retail Stores

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Retail Stores are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Metro Retail is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Asia United Bank

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Asia United Bank are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Asia United exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metro Retail and Asia United

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

The idea behind Metro Retail Stores and Asia United Bank 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.