Correlation Between Metropolitan Bank and Security Bank
Can any of the company-specific risk be diversified away by investing in both Metropolitan Bank and Security 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 Metropolitan Bank and Security Bank 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 Security Bank Corp, you can compare the effects of market volatilities on Metropolitan Bank and Security 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 Metropolitan Bank with a short position of Security Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan Bank and Security Bank.
Diversification Opportunities for Metropolitan Bank and Security Bank
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Metropolitan and Security is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Bank Trust and Security Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Security Bank Corp 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 Security Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Security Bank Corp has no effect on the direction of Metropolitan Bank i.e., Metropolitan Bank and Security Bank go up and down completely randomly.
Pair Corralation between Metropolitan Bank and Security Bank
Assuming the 90 days trading horizon Metropolitan Bank is expected to generate 4.71 times less return on investment than Security Bank. But when comparing it to its historical volatility, Metropolitan Bank Trust is 1.41 times less risky than Security Bank. It trades about 0.06 of its potential returns per unit of risk. Security Bank Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 6,013 in Security Bank Corp on August 28, 2024 and sell it today you would earn a total of 2,642 from holding Security Bank Corp or generate 43.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metropolitan Bank Trust vs. Security Bank Corp
Performance |
| Timeline |
| Metropolitan Bank Trust |
| Security Bank Corp |
Metropolitan Bank and Security Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan Bank and Security Bank
The main advantage of trading using opposite Metropolitan Bank and Security Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan Bank position performs unexpectedly, Security 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 Security Bank will offset losses from the drop in Security Bank's long position.The idea behind Metropolitan Bank Trust and Security Bank 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 Valuation module to check real value of public entities based on technical and fundamental data.
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