Correlation Between Signature Bank and Metropolitan Bank

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

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

Diversification Opportunities for Signature Bank and Metropolitan Bank

0.45

Correlation Coefficient

Signature Bank  Metropolitan Bank

Very weak diversification

The 3 months correlation between Signature and Metropolitan is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Signature Bank 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 Signature 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 Signature Bank 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 Signature Bank i.e., Signature Bank and Metropolitan Bank go up and down completely randomly.

Pair Corralation between Signature Bank and Metropolitan Bank

If you would invest  5,044  in Metropolitan Bank Holding on September 3, 2024 and sell it today you would earn a total of  1,450  from holding Metropolitan Bank Holding or generate 28.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Signature Bank  vs.  Metropolitan Bank Holding

Signature Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Signature Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Signature Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 Signature Bank and Metropolitan Bank

The main advantage of trading using opposite Signature Bank and Metropolitan Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Signature Bank 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 Signature Bank 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 Commodity Directory module to find actively traded commodities issued by global exchanges.