Correlation Between Pescanova and Metrovacesa

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

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

Diversification Opportunities for Pescanova and Metrovacesa

-0.03

Correlation Coefficient

Pescanova  Metrovacesa

Good diversification

The 3 months correlation between Pescanova and Metrovacesa is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Pescanova SA and Metrovacesa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metrovacesa SA and Pescanova 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 Pescanova SA are associated (or correlated) with Metrovacesa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metrovacesa SA has no effect on the direction of Pescanova i.e., Pescanova and Metrovacesa go up and down completely randomly.

Pair Corralation between Pescanova and Metrovacesa

Assuming the 90 days trading horizon Pescanova SA is expected to generate 6.33 times more return on investment than Metrovacesa. However, Pescanova is 6.33 times more volatile than Metrovacesa SA. It trades about 0.02 of its potential returns per unit of risk. Metrovacesa SA is currently generating about 0.12 per unit of risk. If you would invest  36.00  in Pescanova SA on September 13, 2024 and sell it today you would lose (1.00) from holding Pescanova SA or give up 2.78% of portfolio value over 90 days.

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

Pescanova SA  vs.  Metrovacesa SA

Pescanova SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pescanova SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Pescanova may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Metrovacesa SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metrovacesa SA are ranked lower than 9 (%) 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.

Pair Trading with Pescanova and Metrovacesa

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

The idea behind Pescanova SA and Metrovacesa SA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.