Correlation Between Jollibee Foods and Metropolitan Bank

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

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

Diversification Opportunities for Jollibee Foods and Metropolitan Bank

0.82

Correlation Coefficient

Jollibee Foods  Metropolitan Bank

Very poor diversification

The 3 months correlation between Jollibee and Metropolitan is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Jollibee Foods Corp 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 Jollibee Foods 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 Jollibee Foods Corp 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 Jollibee Foods i.e., Jollibee Foods and Metropolitan Bank go up and down completely randomly.

Pair Corralation between Jollibee Foods and Metropolitan Bank

Assuming the 90 days trading horizon Jollibee Foods is expected to generate 1.32 times less return on investment than Metropolitan Bank. But when comparing it to its historical volatility, Jollibee Foods Corp is 1.21 times less risky than Metropolitan Bank. It trades about 0.06 of its potential returns per unit of risk. Metropolitan Bank Trust is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,201  in Metropolitan Bank Trust on August 30, 2024 and sell it today you would earn a total of  499.00  from holding Metropolitan Bank Trust or generate 6.93% return on investment over 90 days.

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

Jollibee Foods Corp  vs.  Metropolitan Bank Trust

Jollibee Foods Corp

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jollibee Foods Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Jollibee Foods 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

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan Bank Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Metropolitan Bank may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Jollibee Foods and Metropolitan Bank

The main advantage of trading using opposite Jollibee Foods and Metropolitan Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jollibee Foods 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 Jollibee Foods Corp 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.