Correlation Between Metro Retail and SSI

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

Diversification Opportunities for Metro Retail and SSI

-0.33

Correlation Coefficient

Metro Retail  SSI

Very good diversification

The 3 months correlation between Metro and SSI is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Metro Retail Stores and SSI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSI Group 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 SSI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSI Group has no effect on the direction of Metro Retail i.e., Metro Retail and SSI go up and down completely randomly.

Pair Corralation between Metro Retail and SSI

Assuming the 90 days trading horizon Metro Retail is expected to generate 2.13 times less return on investment than SSI. But when comparing it to its historical volatility, Metro Retail Stores is 1.29 times less risky than SSI. It trades about 0.01 of its potential returns per unit of risk. SSI Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  279.00  in SSI Group on September 23, 2024 and sell it today you would earn a total of  22.00  from holding SSI Group or generate 7.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.83%
Values	Daily Returns

Metro Retail Stores  vs.  SSI Group

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.

SSI Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Metro Retail and SSI

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

The idea behind Metro Retail Stores and SSI Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.