Correlation Between Metrovacesa and Berkeley Energia

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

By analyzing existing cross correlation between Metrovacesa SA and Berkeley Energia Limited, you can compare the effects of market volatilities on Metrovacesa and Berkeley Energia 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 Berkeley Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metrovacesa and Berkeley Energia.

Diversification Opportunities for Metrovacesa and Berkeley Energia

0.72

Correlation Coefficient

Metrovacesa  Berkeley Energia

Poor diversification

The 3 months correlation between Metrovacesa and Berkeley is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Metrovacesa SA and Berkeley Energia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkeley Energia 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 Berkeley Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkeley Energia has no effect on the direction of Metrovacesa i.e., Metrovacesa and Berkeley Energia go up and down completely randomly.

Pair Corralation between Metrovacesa and Berkeley Energia

Assuming the 90 days trading horizon Metrovacesa is expected to generate 1.08 times less return on investment than Berkeley Energia. But when comparing it to its historical volatility, Metrovacesa SA is 3.9 times less risky than Berkeley Energia. It trades about 0.28 of its potential returns per unit of risk. Berkeley Energia Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Berkeley Energia Limited on December 2, 2024 and sell it today you would earn a total of  3.00  from holding Berkeley Energia Limited or generate 14.29% return on investment over 90 days.

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

Metrovacesa SA  vs.  Berkeley Energia Limited

Metrovacesa SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metrovacesa SA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Metrovacesa exhibited solid returns over the last few months and may actually be approaching a breakup point.

Berkeley Energia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Berkeley Energia Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Berkeley Energia exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metrovacesa and Berkeley Energia

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

The idea behind Metrovacesa SA and Berkeley Energia Limited 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 Commodity Directory module to find actively traded commodities issued by global exchanges.