Correlation Between Metro and Eastwood Bio

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

By analyzing existing cross correlation between Metro Inc and Eastwood Bio Medical Canada, you can compare the effects of market volatilities on Metro and Eastwood Bio 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 with a short position of Eastwood Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro and Eastwood Bio.

Diversification Opportunities for Metro and Eastwood Bio

-0.39

Correlation Coefficient

Metro  Eastwood Bio

Very good diversification

The 3 months correlation between Metro and Eastwood is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Metro Inc and Eastwood Bio Medical Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastwood Bio Medical and Metro 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 Inc are associated (or correlated) with Eastwood Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastwood Bio Medical has no effect on the direction of Metro i.e., Metro and Eastwood Bio go up and down completely randomly.

Pair Corralation between Metro and Eastwood Bio

Assuming the 90 days trading horizon Metro Inc is expected to generate 0.06 times more return on investment than Eastwood Bio. However, Metro Inc is 15.61 times less risky than Eastwood Bio. It trades about -0.15 of its potential returns per unit of risk. Eastwood Bio Medical Canada is currently generating about -0.09 per unit of risk. If you would invest  9,320  in Metro Inc on October 7, 2024 and sell it today you would lose (192.00) from holding Metro Inc or give up 2.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Metro Inc  vs.  Eastwood Bio Medical Canada

Metro Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Metro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Eastwood Bio Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastwood Bio Medical Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Eastwood Bio is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Metro and Eastwood Bio

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

The idea behind Metro Inc and Eastwood Bio Medical Canada 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.