Correlation Between Metropolitan Bank and FB Financial

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

Diversification Opportunities for Metropolitan Bank and FB Financial

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Metropolitan and FBK is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Bank Holding and FB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FB 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 FB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FB Financial Corp has no effect on the direction of Metropolitan Bank i.e., Metropolitan Bank and FB Financial go up and down completely randomly.

Pair Corralation between Metropolitan Bank and FB Financial

Considering the 90-day investment horizon Metropolitan Bank Holding is expected to under-perform the FB Financial. In addition to that, Metropolitan Bank is 1.54 times more volatile than FB Financial Corp. It trades about -0.1 of its total potential returns per unit of risk. FB Financial Corp is currently generating about 0.16 per unit of volatility. If you would invest  3,515  in FB Financial Corp on December 29, 2023 and sell it today you would earn a total of  250.00  from holding FB Financial Corp or generate 7.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Metropolitan Bank Holding  vs.  FB Financial Corp

 Performance 
       Timeline  
Metropolitan Bank Holding 

Risk-Adjusted Performance

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Over the last 90 days Metropolitan Bank Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
FB Financial Corp 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days FB Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, FB Financial is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Metropolitan Bank and FB Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Metropolitan Bank and FB Financial

The main advantage of trading using opposite Metropolitan Bank and FB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan Bank position performs unexpectedly, FB 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 FB Financial will offset losses from the drop in FB Financial's long position.
The idea behind Metropolitan Bank Holding and FB Financial Corp 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 CEOs Directory module to screen CEOs from public companies around the world.

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