Correlation Between Metro Bank and Capital Metals
Can any of the company-specific risk be diversified away by investing in both Metro Bank and Capital Metals 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 Metro Bank and Capital Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metro Bank PLC and Capital Metals PLC, you can compare the effects of market volatilities on Metro Bank and Capital Metals 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 Metro Bank with a short position of Capital Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Bank and Capital Metals.
Diversification Opportunities for Metro Bank and Capital Metals
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Metro and Capital is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Metro Bank PLC and Capital Metals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Metals PLC and Metro 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 Metro Bank PLC are associated (or correlated) with Capital Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Metals PLC has no effect on the direction of Metro Bank i.e., Metro Bank and Capital Metals go up and down completely randomly.
Pair Corralation between Metro Bank and Capital Metals
Assuming the 90 days trading horizon Metro Bank PLC is expected to generate 1.22 times more return on investment than Capital Metals. However, Metro Bank is 1.22 times more volatile than Capital Metals PLC. It trades about 0.03 of its potential returns per unit of risk. Capital Metals PLC is currently generating about -0.16 per unit of risk. If you would invest 9,380 in Metro Bank PLC on October 28, 2024 and sell it today you would earn a total of 100.00 from holding Metro Bank PLC or generate 1.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metro Bank PLC vs. Capital Metals PLC
Performance |
| Timeline |
| Metro Bank PLC |
| Capital Metals PLC |
Metro Bank and Capital Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro Bank and Capital Metals
The main advantage of trading using opposite Metro Bank and Capital Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Bank position performs unexpectedly, Capital Metals 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 Capital Metals will offset losses from the drop in Capital Metals' long position.| Metro Bank vs. HCA Healthcare | Metro Bank vs. Flow Traders NV | Metro Bank vs. Associated British Foods | Metro Bank vs. National Beverage Corp |
| Capital Metals vs. Givaudan SA | Capital Metals vs. Antofagasta PLC | Capital Metals vs. Ferrexpo PLC | Capital Metals vs. Atalaya Mining |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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