Correlation Between Investar Holding and Metropolitan Bank
Can any of the company-specific risk be diversified away by investing in both Investar Holding and Metropolitan 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 Investar Holding and Metropolitan Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Investar Holding Corp and Metropolitan Bank Holding, you can compare the effects of market volatilities on Investar Holding and Metropolitan 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 Investar Holding with a short position of Metropolitan Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investar Holding and Metropolitan Bank.
Diversification Opportunities for Investar Holding and Metropolitan Bank
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Investar and Metropolitan is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Investar Holding Corp and Metropolitan Bank Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan Bank Holding and Investar Holding 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 Investar Holding Corp are associated (or correlated) with Metropolitan Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan Bank Holding has no effect on the direction of Investar Holding i.e., Investar Holding and Metropolitan Bank go up and down completely randomly.
Pair Corralation between Investar Holding and Metropolitan Bank
Given the investment horizon of 90 days Investar Holding is expected to generate 1.56 times less return on investment than Metropolitan Bank. But when comparing it to its historical volatility, Investar Holding Corp is 1.21 times less risky than Metropolitan Bank. It trades about 0.21 of its potential returns per unit of risk. Metropolitan Bank Holding is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 5,405 in Metropolitan Bank Holding on August 30, 2024 and sell it today you would earn a total of 1,324 from holding Metropolitan Bank Holding or generate 24.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investar Holding Corp vs. Metropolitan Bank Holding
Performance |
| Timeline |
| Investar Holding Corp |
| Metropolitan Bank Holding |
Investar Holding and Metropolitan Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investar Holding and Metropolitan Bank
The main advantage of trading using opposite Investar Holding and Metropolitan Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investar Holding position performs unexpectedly, Metropolitan 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 Metropolitan Bank will offset losses from the drop in Metropolitan Bank's long position.| Investar Holding vs. Magyar Bancorp | Investar Holding vs. Home Federal Bancorp | Investar Holding vs. Community West Bancshares | Investar Holding vs. First Northwest Bancorp |
| Metropolitan Bank vs. Customers Bancorp | Metropolitan Bank vs. BayCom Corp | Metropolitan Bank vs. Capital Bancorp | Metropolitan Bank vs. Investar Holding Corp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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