Correlation Between Metropolitan Bank and BankUnited

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

Diversification Opportunities for Metropolitan Bank and BankUnited

0.92

Correlation Coefficient

Metropolitan Bank  BankUnited

Almost no diversification

The 3 months correlation between Metropolitan and BankUnited is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Bank Holding and BankUnited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankUnited 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 BankUnited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankUnited has no effect on the direction of Metropolitan Bank i.e., Metropolitan Bank and BankUnited go up and down completely randomly.

Pair Corralation between Metropolitan Bank and BankUnited

Considering the 90-day investment horizon Metropolitan Bank Holding is expected to generate 1.1 times more return on investment than BankUnited. However, Metropolitan Bank is 1.1 times more volatile than BankUnited. It trades about -0.05 of its potential returns per unit of risk. BankUnited is currently generating about -0.07 per unit of risk. If you would invest  5,945  in Metropolitan Bank Holding on December 24, 2024 and sell it today you would lose (432.00) from holding Metropolitan Bank Holding or give up 7.27% of portfolio value over 90 days.

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

Metropolitan Bank Holding  vs.  BankUnited

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 latest inconsistent performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

BankUnited

Risk-Adjusted Performance

Very Weak

Over the last 90 days BankUnited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Metropolitan Bank and BankUnited

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

The idea behind Metropolitan Bank Holding and BankUnited 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.