Correlation Between Metro Bank and FC Investment
Can any of the company-specific risk be diversified away by investing in both Metro Bank and FC Investment 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 FC Investment 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 FC Investment Trust, you can compare the effects of market volatilities on Metro Bank and FC Investment 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 FC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Bank and FC Investment.
Diversification Opportunities for Metro Bank and FC Investment
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Metro and FCIT is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Metro Bank PLC and FC Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FC Investment Trust 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 FC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FC Investment Trust has no effect on the direction of Metro Bank i.e., Metro Bank and FC Investment go up and down completely randomly.
Pair Corralation between Metro Bank and FC Investment
Assuming the 90 days trading horizon Metro Bank PLC is expected to generate 4.26 times more return on investment than FC Investment. However, Metro Bank is 4.26 times more volatile than FC Investment Trust. It trades about 0.03 of its potential returns per unit of risk. FC Investment Trust is currently generating about 0.05 per unit of risk. If you would invest 9,250 in Metro Bank PLC on October 12, 2024 and sell it today you would earn a total of 100.00 from holding Metro Bank PLC or generate 1.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metro Bank PLC vs. FC Investment Trust
Performance |
| Timeline |
| Metro Bank PLC |
| FC Investment Trust |
Metro Bank and FC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro Bank and FC Investment
The main advantage of trading using opposite Metro Bank and FC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Bank position performs unexpectedly, FC Investment 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 FC Investment will offset losses from the drop in FC Investment's long position.| Metro Bank vs. JD Sports Fashion | Metro Bank vs. Molson Coors Beverage | Metro Bank vs. Verizon Communications | Metro Bank vs. Universal Display Corp |
| FC Investment vs. Sparebank 1 SR | FC Investment vs. Zurich Insurance Group | FC Investment vs. Tetragon Financial Group | FC Investment vs. Metro Bank PLC |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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