Correlation Between Metropolitan Bank and First Guaranty

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

Diversification Opportunities for Metropolitan Bank and First Guaranty

0.37

Correlation Coefficient

Metropolitan Bank  First Guaranty

Weak diversification

The 3 months correlation between Metropolitan and First is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan Bank Holding and First Guaranty Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Guaranty Bancshares 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 First Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Guaranty Bancshares has no effect on the direction of Metropolitan Bank i.e., Metropolitan Bank and First Guaranty go up and down completely randomly.

Pair Corralation between Metropolitan Bank and First Guaranty

Considering the 90-day investment horizon Metropolitan Bank Holding is expected to generate 1.08 times more return on investment than First Guaranty. However, Metropolitan Bank is 1.08 times more volatile than First Guaranty Bancshares. It trades about 0.1 of its potential returns per unit of risk. First Guaranty Bancshares is currently generating about -0.07 per unit of risk. If you would invest  5,933  in Metropolitan Bank Holding on October 23, 2024 and sell it today you would earn a total of  167.00  from holding Metropolitan Bank Holding or generate 2.81% return on investment over 90 days.

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

Metropolitan Bank Holding  vs.  First Guaranty Bancshares

Metropolitan Bank Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan Bank Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental indicators, Metropolitan Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

First Guaranty Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Guaranty Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Preferred Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Metropolitan Bank and First Guaranty

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

The idea behind Metropolitan Bank Holding and First Guaranty Bancshares 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.