Correlation Between Metro Bank and Tower Resources
Can any of the company-specific risk be diversified away by investing in both Metro Bank and Tower Resources 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 Tower Resources 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 Tower Resources plc, you can compare the effects of market volatilities on Metro Bank and Tower Resources 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 Tower Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Bank and Tower Resources.
Diversification Opportunities for Metro Bank and Tower Resources
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Metro and Tower is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Metro Bank PLC and Tower Resources plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Resources 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 Tower Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Resources plc has no effect on the direction of Metro Bank i.e., Metro Bank and Tower Resources go up and down completely randomly.
Pair Corralation between Metro Bank and Tower Resources
Assuming the 90 days trading horizon Metro Bank PLC is expected to generate 0.51 times more return on investment than Tower Resources. However, Metro Bank PLC is 1.97 times less risky than Tower Resources. It trades about 0.02 of its potential returns per unit of risk. Tower Resources plc is currently generating about -0.2 per unit of risk. If you would invest 9,310 in Metro Bank PLC on October 30, 2024 and sell it today you would earn a total of 50.00 from holding Metro Bank PLC or generate 0.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metro Bank PLC vs. Tower Resources plc
Performance |
| Timeline |
| Metro Bank PLC |
| Tower Resources plc |
Metro Bank and Tower Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro Bank and Tower Resources
The main advantage of trading using opposite Metro Bank and Tower Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Bank position performs unexpectedly, Tower Resources 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 Tower Resources will offset losses from the drop in Tower Resources' long position.| Metro Bank vs. URU Metals | Metro Bank vs. Bisichi Mining PLC | Metro Bank vs. European Metals Holdings | Metro Bank vs. Cornish Metals |
| Tower Resources vs. Zoom Video Communications | Tower Resources vs. Enbridge | Tower Resources vs. Endo International PLC | Tower Resources vs. Cornish Metals |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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