Correlation Between Fifth Third and MetLife Preferred

Can any of the company-specific risk be diversified away by investing in both Fifth Third and MetLife Preferred 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 Fifth Third and MetLife Preferred into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fifth Third Bancorp and MetLife Preferred Stock, you can compare the effects of market volatilities on Fifth Third and MetLife Preferred 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 Fifth Third with a short position of MetLife Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and MetLife Preferred.

Diversification Opportunities for Fifth Third and MetLife Preferred

0.29

Correlation Coefficient

Fifth Third  MetLife Preferred

Modest diversification

The 3 months correlation between Fifth and MetLife is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and MetLife Preferred Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife Preferred Stock and Fifth Third 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 Fifth Third Bancorp are associated (or correlated) with MetLife Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetLife Preferred Stock has no effect on the direction of Fifth Third i.e., Fifth Third and MetLife Preferred go up and down completely randomly.

Pair Corralation between Fifth Third and MetLife Preferred

Assuming the 90 days horizon Fifth Third Bancorp is expected to generate 1.69 times more return on investment than MetLife Preferred. However, Fifth Third is 1.69 times more volatile than MetLife Preferred Stock. It trades about -0.07 of its potential returns per unit of risk. MetLife Preferred Stock is currently generating about -0.14 per unit of risk. If you would invest  2,285  in Fifth Third Bancorp on September 25, 2024 and sell it today you would lose (97.00) from holding Fifth Third Bancorp or give up 4.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Fifth Third Bancorp  vs.  MetLife Preferred Stock

Fifth Third Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fifth Third Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Fifth Third is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

MetLife Preferred Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MetLife Preferred Stock has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, MetLife Preferred is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fifth Third and MetLife Preferred

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

The idea behind Fifth Third Bancorp and MetLife Preferred Stock 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.