Correlation Between Metropolitan Bank and Coastal Financial
Can any of the company-specific risk be diversified away by investing in both Metropolitan Bank and Coastal Financial 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 Coastal Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metropolitan Bank Holding and Coastal Financial Corp, you can compare the effects of market volatilities on Metropolitan Bank and Coastal Financial 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 Coastal Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan Bank and Coastal Financial.
Diversification Opportunities for Metropolitan Bank and Coastal Financial
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Metropolitan and Coastal is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Bank Holding and Coastal Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coastal Financial 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 Holding are associated (or correlated) with Coastal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coastal Financial Corp has no effect on the direction of Metropolitan Bank i.e., Metropolitan Bank and Coastal Financial go up and down completely randomly.
Pair Corralation between Metropolitan Bank and Coastal Financial
Considering the 90-day investment horizon Metropolitan Bank Holding is expected to under-perform the Coastal Financial. In addition to that, Metropolitan Bank is 1.65 times more volatile than Coastal Financial Corp. It trades about -0.1 of its total potential returns per unit of risk. Coastal Financial Corp is currently generating about 0.03 per unit of volatility. If you would invest 3,698 in Coastal Financial Corp on January 19, 2024 and sell it today you would earn a total of 40.00 from holding Coastal Financial Corp or generate 1.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metropolitan Bank Holding vs. Coastal Financial Corp
Performance |
| Timeline |
| Metropolitan Bank Holding |
| Coastal Financial Corp |
Metropolitan Bank and Coastal Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan Bank and Coastal Financial
The main advantage of trading using opposite Metropolitan Bank and Coastal Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan Bank position performs unexpectedly, Coastal Financial 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 Coastal Financial will offset losses from the drop in Coastal Financial's long position.| Metropolitan Bank vs. Customers Bancorp | Metropolitan Bank vs. BayCom Corp | Metropolitan Bank vs. Capital Bancorp | Metropolitan Bank vs. Investar Holding Corp |
| Coastal Financial vs. Affinity Bancshares | Coastal Financial vs. HMN Financial | Coastal Financial vs. Home Federal Bancorp | Coastal Financial vs. First Business Financial |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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