Correlation Between Union Bank and Metropolitan Bank

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

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

Diversification Opportunities for Union Bank and Metropolitan Bank

0.45

Correlation Coefficient

Union Bank  Metropolitan Bank

Very weak diversification

The 3 months correlation between Union and Metropolitan is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Union Bank of and Metropolitan Bank Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan Bank Trust and Union 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 Union Bank of 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 Trust has no effect on the direction of Union Bank i.e., Union Bank and Metropolitan Bank go up and down completely randomly.

Pair Corralation between Union Bank and Metropolitan Bank

Assuming the 90 days trading horizon Union Bank of is expected to generate 0.65 times more return on investment than Metropolitan Bank. However, Union Bank of is 1.53 times less risky than Metropolitan Bank. It trades about -0.11 of its potential returns per unit of risk. Metropolitan Bank Trust is currently generating about -0.12 per unit of risk. If you would invest  3,300  in Union Bank of on April 16, 2025 and sell it today you would lose (65.00) from holding Union Bank of or give up 1.97% of portfolio value over 90 days.

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

Union Bank of  vs.  Metropolitan Bank Trust

Union Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Union Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Union Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Metropolitan Bank Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan Bank Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Metropolitan Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Union Bank and Metropolitan Bank

The main advantage of trading using opposite Union Bank and Metropolitan Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Bank 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 Union Bank of and Metropolitan Bank Trust 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..