Correlation Between Metro Bank and TBC Bank
Can any of the company-specific risk be diversified away by investing in both Metro Bank and TBC 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 Metro Bank and TBC Bank 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 TBC Bank Group, you can compare the effects of market volatilities on Metro Bank and TBC 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 Metro Bank with a short position of TBC Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Bank and TBC Bank.
Diversification Opportunities for Metro Bank and TBC Bank
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Metro and TBC is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Metro Bank PLC and TBC Bank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TBC Bank Group 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 TBC Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TBC Bank Group has no effect on the direction of Metro Bank i.e., Metro Bank and TBC Bank go up and down completely randomly.
Pair Corralation between Metro Bank and TBC Bank
Assuming the 90 days trading horizon Metro Bank PLC is expected to generate 1.38 times more return on investment than TBC Bank. However, Metro Bank is 1.38 times more volatile than TBC Bank Group. It trades about 0.15 of its potential returns per unit of risk. TBC Bank Group is currently generating about 0.05 per unit of risk. If you would invest 3,410 in Metro Bank PLC on November 3, 2024 and sell it today you would earn a total of 6,810 from holding Metro Bank PLC or generate 199.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metro Bank PLC vs. TBC Bank Group
Performance |
| Timeline |
| Metro Bank PLC |
| TBC Bank Group |
Metro Bank and TBC Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro Bank and TBC Bank
The main advantage of trading using opposite Metro Bank and TBC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Bank position performs unexpectedly, TBC 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 TBC Bank will offset losses from the drop in TBC Bank's long position.| Metro Bank vs. Air Products Chemicals | Metro Bank vs. Naked Wines plc | Metro Bank vs. Pentair PLC | Metro Bank vs. Sealed Air Corp |
| TBC Bank vs. Inspiration Healthcare Group | TBC Bank vs. Cardinal Health | TBC Bank vs. Molson Coors Beverage | TBC Bank vs. Naturhouse Health SA |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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