Correlation Between First Abacus and Metro Retail

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

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

Diversification Opportunities for First Abacus and Metro Retail

-0.04

Correlation Coefficient

First Abacus  Metro Retail

Good diversification

The 3 months correlation between First and Metro is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Abacus Financial and Metro Retail Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Retail Stores and First Abacus 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 First Abacus Financial are associated (or correlated) with Metro Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Retail Stores has no effect on the direction of First Abacus i.e., First Abacus and Metro Retail go up and down completely randomly.

Pair Corralation between First Abacus and Metro Retail

Assuming the 90 days trading horizon First Abacus Financial is expected to generate 3.55 times more return on investment than Metro Retail. However, First Abacus is 3.55 times more volatile than Metro Retail Stores. It trades about 0.01 of its potential returns per unit of risk. Metro Retail Stores is currently generating about -0.03 per unit of risk. If you would invest  62.00  in First Abacus Financial on April 21, 2025 and sell it today you would lose (1.00) from holding First Abacus Financial or give up 1.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	24.59%
Values	Daily Returns

First Abacus Financial  vs.  Metro Retail Stores

First Abacus Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Abacus Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, First Abacus is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Metro Retail Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metro Retail Stores has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Metro Retail is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with First Abacus and Metro Retail

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

The idea behind First Abacus Financial and Metro Retail Stores 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.