Correlation Between Metro Bank and First Merchants
Can any of the company-specific risk be diversified away by investing in both Metro Bank and First Merchants 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 First Merchants 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 First Merchants, you can compare the effects of market volatilities on Metro Bank and First Merchants 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 First Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Bank and First Merchants.
Diversification Opportunities for Metro Bank and First Merchants
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Metro and First is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Metro Bank PLC and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants 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 First Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Merchants has no effect on the direction of Metro Bank i.e., Metro Bank and First Merchants go up and down completely randomly.
Pair Corralation between Metro Bank and First Merchants
Assuming the 90 days trading horizon Metro Bank PLC is expected to under-perform the First Merchants. In addition to that, Metro Bank is 3.87 times more volatile than First Merchants. It trades about -0.07 of its total potential returns per unit of risk. First Merchants is currently generating about 0.04 per unit of volatility. If you would invest 2,538 in First Merchants on September 5, 2025 and sell it today you would earn a total of 37.00 from holding First Merchants or generate 1.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Metro Bank PLC vs. First Merchants
Performance |
| Timeline |
| Metro Bank PLC |
| First Merchants |
Metro Bank and First Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro Bank and First Merchants
The main advantage of trading using opposite Metro Bank and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Bank position performs unexpectedly, First Merchants 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 Merchants will offset losses from the drop in First Merchants' long position.| Metro Bank vs. Alliance Data Systems | Metro Bank vs. Foresight Environmental Infrastructure | Metro Bank vs. Orient Telecoms | Metro Bank vs. Extra Space Storage |
| First Merchants vs. Choice Hotels International | First Merchants vs. Pintec Technology Holdings | First Merchants vs. Aegean Airlines SA | First Merchants vs. Southwest Airlines |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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