Correlation Between MetroCity Bankshares and US Bancorp

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

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

Diversification Opportunities for MetroCity Bankshares and US Bancorp

0.43

Correlation Coefficient

MetroCity Bankshares  US Bancorp

Very weak diversification

The 3 months correlation between MetroCity and USB is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding MetroCity Bankshares and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and MetroCity Bankshares 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 MetroCity Bankshares are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of MetroCity Bankshares i.e., MetroCity Bankshares and US Bancorp go up and down completely randomly.

Pair Corralation between MetroCity Bankshares and US Bancorp

Given the investment horizon of 90 days MetroCity Bankshares is expected to generate 1.14 times more return on investment than US Bancorp. However, MetroCity Bankshares is 1.14 times more volatile than US Bancorp. It trades about 0.1 of its potential returns per unit of risk. US Bancorp is currently generating about 0.08 per unit of risk. If you would invest  1,456  in MetroCity Bankshares on January 28, 2024 and sell it today you would earn a total of  929.00  from holding MetroCity Bankshares or generate 63.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

MetroCity Bankshares  vs.  US Bancorp

MetroCity Bankshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MetroCity Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, MetroCity Bankshares is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

US Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with MetroCity Bankshares and US Bancorp

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

The idea behind MetroCity Bankshares and US Bancorp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.