Correlation Between Metropolitan Bank and Bank of East Asia Limited

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

Diversification Opportunities for Metropolitan Bank and Bank of East Asia Limited

-0.66

Correlation Coefficient

Metropolitan Bank  Bank of East Asia Limited

Excellent diversification

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

Pair Corralation between Metropolitan Bank and Bank of East Asia Limited

Considering the 90-day investment horizon Metropolitan Bank Holding is expected to under-perform the Bank of East Asia Limited. But the stock apears to be less risky and, when comparing its historical volatility, Metropolitan Bank Holding is 1.07 times less risky than Bank of East Asia Limited. The stock trades about -0.02 of its potential returns per unit of risk. The Bank of East is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  124.00  in Bank of East on December 30, 2024 and sell it today you would earn a total of  9.00  from holding Bank of East or generate 7.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

Metropolitan Bank Holding  vs.  Bank of East

Metropolitan Bank Holding

Risk-Adjusted Performance

Very Weak

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

Bank of East Asia Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of East are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Bank of East Asia Limited may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Metropolitan Bank and Bank of East Asia Limited

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

The idea behind Metropolitan Bank Holding and Bank of East 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.