Correlation Between Premium Brands and Metro

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

By analyzing existing cross correlation between Premium Brands Holdings and Metro Inc, you can compare the effects of market volatilities on Premium Brands and Metro 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 Premium Brands with a short position of Metro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premium Brands and Metro.

Diversification Opportunities for Premium Brands and Metro

-0.72

Correlation Coefficient

Premium Brands  Metro

Pay attention - limited upside

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

Pair Corralation between Premium Brands and Metro

Assuming the 90 days trading horizon Premium Brands Holdings is expected to under-perform the Metro. In addition to that, Premium Brands is 1.84 times more volatile than Metro Inc. It trades about -0.17 of its total potential returns per unit of risk. Metro Inc is currently generating about 0.13 per unit of volatility. If you would invest  8,432  in Metro Inc on October 15, 2024 and sell it today you would earn a total of  595.00  from holding Metro Inc or generate 7.06% return on investment over 90 days.

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

Premium Brands Holdings  vs.  Metro Inc

Premium Brands Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Metro Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Metro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Premium Brands and Metro

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

The idea behind Premium Brands Holdings and Metro Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.