Correlation Between Restaurant Brands and Metro

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

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

Diversification Opportunities for Restaurant Brands and Metro

0.66

Correlation Coefficient

Restaurant Brands  Metro

Poor diversification

The 3 months correlation between Restaurant and Metro is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa and Metro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Inc and Restaurant 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 Restaurant Brands International 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 Restaurant Brands i.e., Restaurant Brands and Metro go up and down completely randomly.

Pair Corralation between Restaurant Brands and Metro

Assuming the 90 days trading horizon Restaurant Brands is expected to generate 469.33 times less return on investment than Metro. In addition to that, Restaurant Brands is 1.42 times more volatile than Metro Inc. It trades about 0.0 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  8,979  in Metro Inc on December 31, 2024 and sell it today you would earn a total of  796.00  from holding Metro Inc or generate 8.87% return on investment over 90 days.

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

Restaurant Brands Internationa  vs.  Metro Inc

Restaurant Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Restaurant Brands International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Restaurant Brands is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Metro Inc

Risk-Adjusted Performance

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 May 2025.

Pair Trading with Restaurant Brands and Metro

The main advantage of trading using opposite Restaurant Brands and Metro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant 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 Restaurant Brands International 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.