Correlation Between Metrovacesa and Energy Solar

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

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

Diversification Opportunities for Metrovacesa and Energy Solar

0.18

Correlation Coefficient

Metrovacesa  Energy Solar

Average diversification

The 3 months correlation between Metrovacesa and Energy is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Metrovacesa SA and Energy Solar Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Solar Tech 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 Energy Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Solar Tech has no effect on the direction of Metrovacesa i.e., Metrovacesa and Energy Solar go up and down completely randomly.

Pair Corralation between Metrovacesa and Energy Solar

Assuming the 90 days trading horizon Metrovacesa SA is expected to generate 0.55 times more return on investment than Energy Solar. However, Metrovacesa SA is 1.8 times less risky than Energy Solar. It trades about 0.11 of its potential returns per unit of risk. Energy Solar Tech is currently generating about -0.01 per unit of risk. If you would invest  827.00  in Metrovacesa SA on September 5, 2024 and sell it today you would earn a total of  56.00  from holding Metrovacesa SA or generate 6.77% return on investment over 90 days.

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

Metrovacesa SA  vs.  Energy Solar Tech

Metrovacesa SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metrovacesa SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Metrovacesa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Energy Solar Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Solar Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Energy Solar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Metrovacesa and Energy Solar

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

The idea behind Metrovacesa SA and Energy Solar Tech 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.