Correlation Between Metro Retail and Premiere Entertainment

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

Diversification Opportunities for Metro Retail and Premiere Entertainment

-0.47

Correlation Coefficient

Metro Retail  Premiere Entertainment

Very good diversification

The 3 months correlation between Metro and Premiere is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Metro Retail Stores and Premiere Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premiere Entertainment 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 Premiere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premiere Entertainment has no effect on the direction of Metro Retail i.e., Metro Retail and Premiere Entertainment go up and down completely randomly.

Pair Corralation between Metro Retail and Premiere Entertainment

Assuming the 90 days trading horizon Metro Retail Stores is expected to generate 0.45 times more return on investment than Premiere Entertainment. However, Metro Retail Stores is 2.23 times less risky than Premiere Entertainment. It trades about 0.08 of its potential returns per unit of risk. Premiere Entertainment is currently generating about -0.08 per unit of risk. If you would invest  121.00  in Metro Retail Stores on November 29, 2024 and sell it today you would earn a total of  7.00  from holding Metro Retail Stores or generate 5.79% return on investment over 90 days.

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

Metro Retail Stores  vs.  Premiere Entertainment

Metro Retail Stores

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Retail Stores are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Metro Retail may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Premiere Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premiere Entertainment 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 March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Metro Retail and Premiere Entertainment

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

The idea behind Metro Retail Stores and Premiere Entertainment 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.