Correlation Between Metropolitan Bank and First Foundation

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

Diversification Opportunities for Metropolitan Bank and First Foundation

0.66

Correlation Coefficient

Metropolitan Bank  First Foundation

Poor diversification

The 3 months correlation between Metropolitan and First is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Bank Holding and First Foundation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Foundation 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 First Foundation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Foundation has no effect on the direction of Metropolitan Bank i.e., Metropolitan Bank and First Foundation go up and down completely randomly.

Pair Corralation between Metropolitan Bank and First Foundation

Considering the 90-day investment horizon Metropolitan Bank Holding is expected to generate 0.84 times more return on investment than First Foundation. However, Metropolitan Bank Holding is 1.2 times less risky than First Foundation. It trades about 0.23 of its potential returns per unit of risk. First Foundation is currently generating about 0.09 per unit of risk. If you would invest  6,085  in Metropolitan Bank Holding on April 25, 2025 and sell it today you would earn a total of  1,595  from holding Metropolitan Bank Holding or generate 26.21% return on investment over 90 days.

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

Metropolitan Bank Holding  vs.  First Foundation

Metropolitan Bank Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan Bank Holding are ranked lower than 18 (%) 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.

First Foundation

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Foundation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, First Foundation may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Metropolitan Bank and First Foundation

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

The idea behind Metropolitan Bank Holding and First Foundation 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.