Correlation Between Metropolitan Bank and Lopez Holdings

Can any of the company-specific risk be diversified away by investing in both Metropolitan Bank and Lopez Holdings 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 Lopez Holdings 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 Lopez Holdings Corp, you can compare the effects of market volatilities on Metropolitan Bank and Lopez Holdings 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 Lopez Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan Bank and Lopez Holdings.

Diversification Opportunities for Metropolitan Bank and Lopez Holdings

-0.54

Correlation Coefficient

Metropolitan Bank  Lopez Holdings

Excellent diversification

The 3 months correlation between Metropolitan and Lopez is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Bank Trust and Lopez Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lopez Holdings 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 Lopez Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lopez Holdings Corp has no effect on the direction of Metropolitan Bank i.e., Metropolitan Bank and Lopez Holdings go up and down completely randomly.

Pair Corralation between Metropolitan Bank and Lopez Holdings

Assuming the 90 days trading horizon Metropolitan Bank Trust is expected to generate 1.04 times more return on investment than Lopez Holdings. However, Metropolitan Bank is 1.04 times more volatile than Lopez Holdings Corp. It trades about -0.09 of its potential returns per unit of risk. Lopez Holdings Corp is currently generating about -0.12 per unit of risk. If you would invest  7,945  in Metropolitan Bank Trust on August 31, 2024 and sell it today you would lose (380.00) from holding Metropolitan Bank Trust or give up 4.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Metropolitan Bank Trust  vs.  Lopez Holdings Corp

Metropolitan Bank Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan Bank Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Metropolitan Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Lopez Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lopez Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Metropolitan Bank and Lopez Holdings

The main advantage of trading using opposite Metropolitan Bank and Lopez Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan Bank position performs unexpectedly, Lopez Holdings 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 Lopez Holdings will offset losses from the drop in Lopez Holdings' long position.

The idea behind Metropolitan Bank Trust and Lopez Holdings 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.

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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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.