Correlation Between Metro Retail and Lepanto Consolidated

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

Diversification Opportunities for Metro Retail and Lepanto Consolidated

0.44

Correlation Coefficient

Metro Retail  Lepanto Consolidated

Very weak diversification

The 3 months correlation between Metro and Lepanto is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Metro Retail Stores and Lepanto Consolidated Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lepanto Consolidated 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 Lepanto Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lepanto Consolidated has no effect on the direction of Metro Retail i.e., Metro Retail and Lepanto Consolidated go up and down completely randomly.

Pair Corralation between Metro Retail and Lepanto Consolidated

Assuming the 90 days trading horizon Metro Retail Stores is expected to generate 0.43 times more return on investment than Lepanto Consolidated. However, Metro Retail Stores is 2.34 times less risky than Lepanto Consolidated. It trades about 0.0 of its potential returns per unit of risk. Lepanto Consolidated Mining is currently generating about -0.02 per unit of risk. If you would invest  128.00  in Metro Retail Stores on October 12, 2024 and sell it today you would lose (9.00) from holding Metro Retail Stores or give up 7.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	82.76%
Values	Daily Returns

Metro Retail Stores  vs.  Lepanto Consolidated Mining

Metro Retail Stores

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro Retail Stores has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Metro Retail is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Lepanto Consolidated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lepanto Consolidated Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Metro Retail and Lepanto Consolidated

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

The idea behind Metro Retail Stores and Lepanto Consolidated Mining 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.