Correlation Between Metro Retail and Century Pacific

Can any of the company-specific risk be diversified away by investing in both Metro Retail and Century Pacific 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 Century Pacific 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 Century Pacific Food, you can compare the effects of market volatilities on Metro Retail and Century Pacific 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 Century Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Retail and Century Pacific.

Diversification Opportunities for Metro Retail and Century Pacific

0.42

Correlation Coefficient

Metro Retail  Century Pacific

Very weak diversification

The 3 months correlation between Metro and Century is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Metro Retail Stores and Century Pacific Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Pacific Food 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 Century Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Pacific Food has no effect on the direction of Metro Retail i.e., Metro Retail and Century Pacific go up and down completely randomly.

Pair Corralation between Metro Retail and Century Pacific

Assuming the 90 days trading horizon Metro Retail is expected to generate 1.27 times less return on investment than Century Pacific. But when comparing it to its historical volatility, Metro Retail Stores is 1.48 times less risky than Century Pacific. It trades about 0.06 of its potential returns per unit of risk. Century Pacific Food is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,990  in Century Pacific Food on September 23, 2024 and sell it today you would earn a total of  210.00  from holding Century Pacific Food or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Metro Retail Stores  vs.  Century Pacific Food

Metro Retail Stores

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Retail Stores are ranked lower than 4 (%) 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.

Century Pacific Food

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Century Pacific Food are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Century Pacific is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Metro Retail and Century Pacific

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

The idea behind Metro Retail Stores and Century Pacific Food 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.