Correlation Between Metropolitan Bank and Concepcion Industrial
Can any of the company-specific risk be diversified away by investing in both Metropolitan Bank and Concepcion Industrial 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 Metropolitan Bank and Concepcion Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metropolitan Bank Trust and Concepcion Industrial Corp, you can compare the effects of market volatilities on Metropolitan Bank and Concepcion Industrial 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 Metropolitan Bank with a short position of Concepcion Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan Bank and Concepcion Industrial.
Diversification Opportunities for Metropolitan Bank and Concepcion Industrial
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Metropolitan and Concepcion is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Bank Trust and Concepcion Industrial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Concepcion Industrial and Metropolitan Bank 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 Metropolitan Bank Trust are associated (or correlated) with Concepcion Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Concepcion Industrial has no effect on the direction of Metropolitan Bank i.e., Metropolitan Bank and Concepcion Industrial go up and down completely randomly.
Pair Corralation between Metropolitan Bank and Concepcion Industrial
Assuming the 90 days trading horizon Metropolitan Bank Trust is expected to generate 1.57 times more return on investment than Concepcion Industrial. However, Metropolitan Bank is 1.57 times more volatile than Concepcion Industrial Corp. It trades about -0.01 of its potential returns per unit of risk. Concepcion Industrial Corp is currently generating about -0.03 per unit of risk. If you would invest 7,870 in Metropolitan Bank Trust on August 28, 2024 and sell it today you would lose (105.00) from holding Metropolitan Bank Trust or give up 1.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metropolitan Bank Trust vs. Concepcion Industrial Corp
Performance |
| Timeline |
| Metropolitan Bank Trust |
| Concepcion Industrial |
Metropolitan Bank and Concepcion Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan Bank and Concepcion Industrial
The main advantage of trading using opposite Metropolitan Bank and Concepcion Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan Bank position performs unexpectedly, Concepcion Industrial 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 Concepcion Industrial will offset losses from the drop in Concepcion Industrial's long position.The idea behind Metropolitan Bank Trust and Concepcion Industrial Corp 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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