Correlation Between Metro Retail and Alliance Select

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

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

Diversification Opportunities for Metro Retail and Alliance Select

0.2

Correlation Coefficient

Metro Retail  Alliance Select

Modest diversification

The 3 months correlation between Metro and Alliance is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Metro Retail Stores and Alliance Select Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Select Foods and Metro Retail 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 Metro Retail Stores are associated (or correlated) with Alliance Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Select Foods has no effect on the direction of Metro Retail i.e., Metro Retail and Alliance Select go up and down completely randomly.

Pair Corralation between Metro Retail and Alliance Select

Assuming the 90 days trading horizon Metro Retail is expected to generate 3.64 times less return on investment than Alliance Select. But when comparing it to its historical volatility, Metro Retail Stores is 2.67 times less risky than Alliance Select. It trades about 0.01 of its potential returns per unit of risk. Alliance Select Foods is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  54.00  in Alliance Select Foods on April 1, 2025 and sell it today you would lose (9.00) from holding Alliance Select Foods or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	50.11%
Values	Daily Returns

Metro Retail Stores  vs.  Alliance Select Foods

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 current stock price agitation, may contribute to short-term losses for the retail investors.

Alliance Select Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alliance Select Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Metro Retail and Alliance Select

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

The idea behind Metro Retail Stores and Alliance Select Foods 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.

Check out your portfolio center.

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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.