Correlation Between Bankers Investment and Metro Bank
Can any of the company-specific risk be diversified away by investing in both Bankers Investment 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 Bankers Investment and Metro Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bankers Investment Trust and Metro Bank PLC, you can compare the effects of market volatilities on Bankers Investment 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 Bankers Investment with a short position of Metro Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankers Investment and Metro Bank.
Diversification Opportunities for Bankers Investment and Metro Bank
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bankers and Metro is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bankers Investment Trust 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 Bankers Investment 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 Bankers Investment Trust 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 Bankers Investment i.e., Bankers Investment and Metro Bank go up and down completely randomly.
Pair Corralation between Bankers Investment and Metro Bank
Assuming the 90 days trading horizon Bankers Investment Trust is expected to generate 0.3 times more return on investment than Metro Bank. However, Bankers Investment Trust is 3.31 times less risky than Metro Bank. It trades about 0.22 of its potential returns per unit of risk. Metro Bank PLC is currently generating about 0.06 per unit of risk. If you would invest 11,580 in Bankers Investment Trust on October 17, 2024 and sell it today you would earn a total of 500.00 from holding Bankers Investment Trust or generate 4.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bankers Investment Trust vs. Metro Bank PLC
Performance |
| Timeline |
| Bankers Investment Trust |
| Metro Bank PLC |
Bankers Investment and Metro Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bankers Investment and Metro Bank
The main advantage of trading using opposite Bankers Investment and Metro Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bankers Investment 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.| Bankers Investment vs. Centaur Media | Bankers Investment vs. Fidelity National Information | Bankers Investment vs. Intermediate Capital Group | Bankers Investment vs. Ion Beam Applications |
| Metro Bank vs. Gamma Communications PLC | Metro Bank vs. BlackRock Frontiers Investment | Metro Bank vs. Bankers Investment Trust | Metro Bank vs. Lindsell Train 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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