Correlation Between Metrovacesa and Industria

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

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

Diversification Opportunities for Metrovacesa and Industria

0.42

Correlation Coefficient

Metrovacesa  Industria

Very weak diversification

The 3 months correlation between Metrovacesa and Industria is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Metrovacesa SA and Industria de Diseno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industria de Diseno and Metrovacesa 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 Metrovacesa SA are associated (or correlated) with Industria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industria de Diseno has no effect on the direction of Metrovacesa i.e., Metrovacesa and Industria go up and down completely randomly.

Pair Corralation between Metrovacesa and Industria

Assuming the 90 days trading horizon Metrovacesa SA is expected to generate 1.17 times more return on investment than Industria. However, Metrovacesa is 1.17 times more volatile than Industria de Diseno. It trades about 0.02 of its potential returns per unit of risk. Industria de Diseno is currently generating about -0.12 per unit of risk. If you would invest  1,049  in Metrovacesa SA on April 22, 2025 and sell it today you would earn a total of  11.00  from holding Metrovacesa SA or generate 1.05% return on investment over 90 days.

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

Metrovacesa SA  vs.  Industria de Diseno

Metrovacesa SA

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metrovacesa SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Metrovacesa is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Industria de Diseno

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industria de Diseno 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 sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Metrovacesa and Industria

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

The idea behind Metrovacesa SA and Industria de Diseno 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.