Correlation Between Metropolitan Bank and DMCI Holdings

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

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

Diversification Opportunities for Metropolitan Bank and DMCI Holdings

-0.07

Correlation Coefficient

Metropolitan Bank  DMCI Holdings

Good diversification

The 3 months correlation between Metropolitan and DMCI is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Bank Trust and DMCI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DMCI Holdings 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 Trust are associated (or correlated) with DMCI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DMCI Holdings has no effect on the direction of Metropolitan Bank i.e., Metropolitan Bank and DMCI Holdings go up and down completely randomly.

Pair Corralation between Metropolitan Bank and DMCI Holdings

Assuming the 90 days trading horizon Metropolitan Bank is expected to generate 28.38 times less return on investment than DMCI Holdings. In addition to that, Metropolitan Bank is 1.49 times more volatile than DMCI Holdings. It trades about 0.0 of its total potential returns per unit of risk. DMCI Holdings is currently generating about 0.12 per unit of volatility. If you would invest  1,074  in DMCI Holdings on December 24, 2024 and sell it today you would earn a total of  100.00  from holding DMCI Holdings or generate 9.31% return on investment over 90 days.

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

Metropolitan Bank Trust  vs.  DMCI Holdings

Metropolitan Bank Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metropolitan Bank Trust has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

DMCI Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DMCI Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, DMCI Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Metropolitan Bank and DMCI Holdings

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

The idea behind Metropolitan Bank Trust and DMCI Holdings 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.