Correlation Between Metrovacesa and Inhome Prime

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

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

Diversification Opportunities for Metrovacesa and Inhome Prime

0.69

Correlation Coefficient

Metrovacesa  Inhome Prime

Poor diversification

The 3 months correlation between Metrovacesa and Inhome is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Metrovacesa SA and Inhome Prime Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inhome Prime Properties 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 Inhome Prime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inhome Prime Properties has no effect on the direction of Metrovacesa i.e., Metrovacesa and Inhome Prime go up and down completely randomly.

Pair Corralation between Metrovacesa and Inhome Prime

Assuming the 90 days trading horizon Metrovacesa SA is expected to generate 1.54 times more return on investment than Inhome Prime. However, Metrovacesa is 1.54 times more volatile than Inhome Prime Properties. It trades about 0.07 of its potential returns per unit of risk. Inhome Prime Properties is currently generating about 0.07 per unit of risk. If you would invest  686.00  in Metrovacesa SA on October 27, 2024 and sell it today you would earn a total of  180.00  from holding Metrovacesa SA or generate 26.24% 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.  Inhome Prime Properties

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.

Inhome Prime Properties

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inhome Prime Properties are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Inhome Prime exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metrovacesa and Inhome Prime

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

The idea behind Metrovacesa SA and Inhome Prime Properties 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 Stocks Directory module to find actively traded stocks across global markets.