Correlation Between Metropolitan Bank and Aboitiz Equity

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

Diversification Opportunities for Metropolitan Bank and Aboitiz Equity

0.82

Correlation Coefficient

Metropolitan Bank  Aboitiz Equity

Very poor diversification

The 3 months correlation between Metropolitan and Aboitiz is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Bank Trust and Aboitiz Equity Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aboitiz Equity Ventures 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 Aboitiz Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aboitiz Equity Ventures has no effect on the direction of Metropolitan Bank i.e., Metropolitan Bank and Aboitiz Equity go up and down completely randomly.

Pair Corralation between Metropolitan Bank and Aboitiz Equity

Assuming the 90 days trading horizon Metropolitan Bank Trust is expected to under-perform the Aboitiz Equity. In addition to that, Metropolitan Bank is 1.02 times more volatile than Aboitiz Equity Ventures. It trades about -0.16 of its total potential returns per unit of risk. Aboitiz Equity Ventures is currently generating about -0.11 per unit of volatility. If you would invest  3,515  in Aboitiz Equity Ventures on September 25, 2024 and sell it today you would lose (145.00) from holding Aboitiz Equity Ventures or give up 4.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Metropolitan Bank Trust  vs.  Aboitiz Equity Ventures

Metropolitan Bank Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metropolitan Bank Trust has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Aboitiz Equity Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aboitiz Equity Ventures 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 Aboitiz Equity

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

The idea behind Metropolitan Bank Trust and Aboitiz Equity Ventures 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.