Correlation Between FB Financial and Metropolitan Bank
Can any of the company-specific risk be diversified away by investing in both FB Financial 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 FB Financial and Metropolitan Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FB Financial Corp and Metropolitan Bank Holding, you can compare the effects of market volatilities on FB Financial 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 FB Financial with a short position of Metropolitan Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of FB Financial and Metropolitan Bank.
Diversification Opportunities for FB Financial and Metropolitan Bank
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FBK and Metropolitan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding FB Financial Corp 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 FB Financial 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 FB Financial Corp 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 FB Financial i.e., FB Financial and Metropolitan Bank go up and down completely randomly.
Pair Corralation between FB Financial and Metropolitan Bank
Considering the 90-day investment horizon FB Financial Corp is expected to generate 0.68 times more return on investment than Metropolitan Bank. However, FB Financial Corp is 1.47 times less risky than Metropolitan Bank. It trades about -0.03 of its potential returns per unit of risk. Metropolitan Bank Holding is currently generating about -0.21 per unit of risk. If you would invest 3,683 in FB Financial Corp on January 20, 2024 and sell it today you would lose (127.00) from holding FB Financial Corp or give up 3.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FB Financial Corp vs. Metropolitan Bank Holding
Performance |
| Timeline |
| FB Financial Corp |
| Metropolitan Bank Holding |
FB Financial and Metropolitan Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FB Financial and Metropolitan Bank
The main advantage of trading using opposite FB Financial and Metropolitan Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FB Financial 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 FB Financial Corp 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.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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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