Correlation Between Metrovacesa and Naranja 2050

Can any of the company-specific risk be diversified away by investing in both Metrovacesa and Naranja 2050 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 Metrovacesa and Naranja 2050 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Metrovacesa SA and Naranja 2050 PP, you can compare the effects of market volatilities on Metrovacesa and Naranja 2050 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 Metrovacesa with a short position of Naranja 2050. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metrovacesa and Naranja 2050.

Diversification Opportunities for Metrovacesa and Naranja 2050

0.4

Correlation Coefficient

Metrovacesa  Naranja 2050

Very weak diversification

The 3 months correlation between Metrovacesa and Naranja is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Metrovacesa SA and Naranja 2050 PP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naranja 2050 PP and Metrovacesa 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 Metrovacesa SA are associated (or correlated) with Naranja 2050. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naranja 2050 PP has no effect on the direction of Metrovacesa i.e., Metrovacesa and Naranja 2050 go up and down completely randomly.

Pair Corralation between Metrovacesa and Naranja 2050

Assuming the 90 days trading horizon Metrovacesa SA is expected to generate 1.58 times more return on investment than Naranja 2050. However, Metrovacesa is 1.58 times more volatile than Naranja 2050 PP. It trades about 0.1 of its potential returns per unit of risk. Naranja 2050 PP is currently generating about 0.15 per unit of risk. If you would invest  824.00  in Metrovacesa SA on October 27, 2024 and sell it today you would earn a total of  42.00  from holding Metrovacesa SA or generate 5.1% return on investment over 90 days.

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

Metrovacesa SA  vs.  Naranja 2050 PP

Metrovacesa SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metrovacesa SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Metrovacesa is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Naranja 2050 PP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Naranja 2050 PP are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Naranja 2050 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Metrovacesa and Naranja 2050

The main advantage of trading using opposite Metrovacesa and Naranja 2050 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metrovacesa position performs unexpectedly, Naranja 2050 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 Naranja 2050 will offset losses from the drop in Naranja 2050's long position.

The idea behind Metrovacesa SA and Naranja 2050 PP 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.