Correlation Between MetLife and Ambase Corp

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

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

Diversification Opportunities for MetLife and Ambase Corp

-0.62

Correlation Coefficient

MetLife  Ambase Corp

Excellent diversification

The 3 months correlation between MetLife and Ambase is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Ambase Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambase Corp and MetLife 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 MetLife are associated (or correlated) with Ambase Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambase Corp has no effect on the direction of MetLife i.e., MetLife and Ambase Corp go up and down completely randomly.

Pair Corralation between MetLife and Ambase Corp

Considering the 90-day investment horizon MetLife is expected to generate 0.45 times more return on investment than Ambase Corp. However, MetLife is 2.2 times less risky than Ambase Corp. It trades about 0.13 of its potential returns per unit of risk. Ambase Corp is currently generating about -0.05 per unit of risk. If you would invest  7,698  in MetLife on September 4, 2024 and sell it today you would earn a total of  990.00  from holding MetLife or generate 12.86% return on investment over 90 days.

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

MetLife  vs.  Ambase Corp

MetLife

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, MetLife unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ambase Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambase Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's fundamental 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 MetLife and Ambase Corp

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

The idea behind MetLife and Ambase Corp 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.