Correlation Between Metropolitan Steel and Agritech

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

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

Diversification Opportunities for Metropolitan Steel and Agritech

-0.22

Correlation Coefficient

Metropolitan Steel  Agritech

Very good diversification

The 3 months correlation between Metropolitan and Agritech is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Steel Corp and Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agritech and Metropolitan Steel 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 Metropolitan Steel Corp are associated (or correlated) with Agritech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agritech has no effect on the direction of Metropolitan Steel i.e., Metropolitan Steel and Agritech go up and down completely randomly.

Pair Corralation between Metropolitan Steel and Agritech

Assuming the 90 days trading horizon Metropolitan Steel Corp is expected to under-perform the Agritech. In addition to that, Metropolitan Steel is 2.47 times more volatile than Agritech. It trades about -0.09 of its total potential returns per unit of risk. Agritech is currently generating about -0.01 per unit of volatility. If you would invest  3,831  in Agritech on October 16, 2024 and sell it today you would lose (74.00) from holding Agritech or give up 1.93% of portfolio value over 90 days.

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

Metropolitan Steel Corp  vs.  Agritech

Metropolitan Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metropolitan Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Agritech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Metropolitan Steel and Agritech

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

The idea behind Metropolitan Steel Corp and Agritech 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.