Correlation Between Customers Bancorp and Metropolitan Bank

Can any of the company-specific risk be diversified away by investing in both Customers Bancorp and Metropolitan 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 Customers Bancorp and Metropolitan Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Customers Bancorp and Metropolitan Bank Holding, you can compare the effects of market volatilities on Customers Bancorp and Metropolitan 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 Customers Bancorp with a short position of Metropolitan Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Customers Bancorp and Metropolitan Bank.

Diversification Opportunities for Customers Bancorp and Metropolitan Bank

0.8

Correlation Coefficient

Customers Bancorp  Metropolitan Bank

Very poor diversification

The 3 months correlation between Customers and Metropolitan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Customers Bancorp and Metropolitan Bank Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan Bank Holding and Customers Bancorp 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 Customers Bancorp are associated (or correlated) with Metropolitan Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan Bank Holding has no effect on the direction of Customers Bancorp i.e., Customers Bancorp and Metropolitan Bank go up and down completely randomly.

Pair Corralation between Customers Bancorp and Metropolitan Bank

Given the investment horizon of 90 days Customers Bancorp is expected to generate 1.94 times less return on investment than Metropolitan Bank. In addition to that, Customers Bancorp is 1.06 times more volatile than Metropolitan Bank Holding. It trades about 0.07 of its total potential returns per unit of risk. Metropolitan Bank Holding is currently generating about 0.15 per unit of volatility. If you would invest  5,074  in Metropolitan Bank Holding on September 4, 2024 and sell it today you would earn a total of  1,524  from holding Metropolitan Bank Holding or generate 30.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Customers Bancorp  vs.  Metropolitan Bank Holding

Customers Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Customers Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Customers Bancorp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Metropolitan Bank Holding

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan Bank Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental indicators, Metropolitan Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Customers Bancorp and Metropolitan Bank

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

The idea behind Customers Bancorp and Metropolitan Bank Holding 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.