Correlation Between Metropolitan Steel and Data Agro

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

Diversification Opportunities for Metropolitan Steel and Data Agro

0.76

Correlation Coefficient

Metropolitan Steel  Data Agro

Poor diversification

The 3 months correlation between Metropolitan and Data is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Steel Corp and Data Agro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data Agro 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 Data Agro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data Agro has no effect on the direction of Metropolitan Steel i.e., Metropolitan Steel and Data Agro go up and down completely randomly.

Pair Corralation between Metropolitan Steel and Data Agro

Assuming the 90 days trading horizon Metropolitan Steel Corp is expected to generate 0.59 times more return on investment than Data Agro. However, Metropolitan Steel Corp is 1.68 times less risky than Data Agro. It trades about -0.04 of its potential returns per unit of risk. Data Agro is currently generating about -0.08 per unit of risk. If you would invest  1,074  in Metropolitan Steel Corp on December 30, 2024 and sell it today you would lose (74.00) from holding Metropolitan Steel Corp or give up 6.89% of portfolio value over 90 days.

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

Metropolitan Steel Corp  vs.  Data Agro

Metropolitan Steel Corp

Risk-Adjusted Performance

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 somewhat strong basic indicators, Metropolitan Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Data Agro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Data Agro 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Metropolitan Steel and Data Agro

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

The idea behind Metropolitan Steel Corp and Data Agro 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.