Correlation Between Metro Systems and MFEC PCL

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

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

Diversification Opportunities for Metro Systems and MFEC PCL

-0.65

Correlation Coefficient

Metro Systems  MFEC PCL

Excellent diversification

The 3 months correlation between Metro and MFEC is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Metro Systems and MFEC PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFEC PCL and Metro Systems 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 Systems are associated (or correlated) with MFEC PCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFEC PCL has no effect on the direction of Metro Systems i.e., Metro Systems and MFEC PCL go up and down completely randomly.

Pair Corralation between Metro Systems and MFEC PCL

Assuming the 90 days trading horizon Metro Systems is expected to generate 0.39 times more return on investment than MFEC PCL. However, Metro Systems is 2.58 times less risky than MFEC PCL. It trades about -0.17 of its potential returns per unit of risk. MFEC PCL is currently generating about -0.08 per unit of risk. If you would invest  800.00  in Metro Systems on September 14, 2024 and sell it today you would lose (15.00) from holding Metro Systems or give up 1.87% of portfolio value over 90 days.

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

Metro Systems  vs.  MFEC PCL

Metro Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Metro Systems is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

MFEC PCL

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MFEC PCL are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, MFEC PCL is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Metro Systems and MFEC PCL

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

The idea behind Metro Systems and MFEC PCL 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.