Correlation Between Metro Bank and Agilent Technologies

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

By analyzing existing cross correlation between Metro Bank PLC and Agilent Technologies, you can compare the effects of market volatilities on Metro Bank and Agilent Technologies 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 Metro Bank with a short position of Agilent Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Bank and Agilent Technologies.

Diversification Opportunities for Metro Bank and Agilent Technologies

-0.26

Correlation Coefficient

Metro Bank  Agilent Technologies

Very good diversification

The 3 months correlation between Metro and Agilent is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Metro Bank PLC and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies and Metro 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 Metro Bank PLC are associated (or correlated) with Agilent Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agilent Technologies has no effect on the direction of Metro Bank i.e., Metro Bank and Agilent Technologies go up and down completely randomly.

Pair Corralation between Metro Bank and Agilent Technologies

Assuming the 90 days trading horizon Metro Bank PLC is expected to generate 2.0 times more return on investment than Agilent Technologies. However, Metro Bank is 2.0 times more volatile than Agilent Technologies. It trades about 0.17 of its potential returns per unit of risk. Agilent Technologies is currently generating about -0.04 per unit of risk. If you would invest  6,900  in Metro Bank PLC on October 9, 2024 and sell it today you would earn a total of  2,500  from holding Metro Bank PLC or generate 36.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Metro Bank PLC  vs.  Agilent Technologies

Metro Bank PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Bank PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Metro Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Agilent Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agilent Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Agilent Technologies is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Metro Bank and Agilent Technologies

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

The idea behind Metro Bank PLC and Agilent Technologies 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.