Correlation Between UmweltBank and Metro AG

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

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

Diversification Opportunities for UmweltBank and Metro AG

-0.33

Correlation Coefficient

UmweltBank  Metro AG

Very good diversification

The 3 months correlation between UmweltBank and Metro is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding UmweltBank AG and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG and UmweltBank 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 UmweltBank AG are associated (or correlated) with Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of UmweltBank i.e., UmweltBank and Metro AG go up and down completely randomly.

Pair Corralation between UmweltBank and Metro AG

Assuming the 90 days trading horizon UmweltBank AG is expected to generate 1.32 times more return on investment than Metro AG. However, UmweltBank is 1.32 times more volatile than Metro AG. It trades about -0.06 of its potential returns per unit of risk. Metro AG is currently generating about -0.08 per unit of risk. If you would invest  1,343  in UmweltBank AG on October 24, 2024 and sell it today you would lose (733.00) from holding UmweltBank AG or give up 54.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

UmweltBank AG  vs.  Metro AG

UmweltBank AG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UmweltBank AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, UmweltBank is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Metro AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with UmweltBank and Metro AG

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

The idea behind UmweltBank AG and Metro AG 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.