Correlation Between Absa Group and Metro Bank
Can any of the company-specific risk be diversified away by investing in both Absa Group and Metro Bank 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 Absa Group and Metro Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absa Group Limited and Metro Bank PLC, you can compare the effects of market volatilities on Absa Group and Metro Bank 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 Absa Group with a short position of Metro Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absa Group and Metro Bank.
Diversification Opportunities for Absa Group and Metro Bank
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Absa and Metro is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Absa Group Limited and Metro Bank PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Bank PLC and Absa Group 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 Absa Group Limited are associated (or correlated) with Metro Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Bank PLC has no effect on the direction of Absa Group i.e., Absa Group and Metro Bank go up and down completely randomly.
Pair Corralation between Absa Group and Metro Bank
If you would invest 772.00 in Absa Group Limited on August 31, 2024 and sell it today you would earn a total of 39.00 from holding Absa Group Limited or generate 5.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 0.79% |
| Values | Daily Returns |
Absa Group Limited vs. Metro Bank PLC
Performance |
| Timeline |
| Absa Group Limited |
| Metro Bank PLC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Absa Group and Metro Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absa Group and Metro Bank
The main advantage of trading using opposite Absa Group and Metro Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absa Group position performs unexpectedly, Metro Bank 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 Bank will offset losses from the drop in Metro Bank's long position.The idea behind Absa Group Limited and Metro Bank PLC 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.| Metro Bank vs. Nmb Financial Corp | Metro Bank vs. Hang Seng Bank | Metro Bank vs. Southern BancShares NC | Metro Bank vs. Absa Group Limited |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |