Correlation Between MetLife and MetLife Preferred

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

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

Diversification Opportunities for MetLife and MetLife Preferred

-0.01

Correlation Coefficient

MetLife  MetLife Preferred

Good diversification

The 3 months correlation between MetLife and MetLife is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding MetLife 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 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 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 MetLife i.e., MetLife and MetLife Preferred go up and down completely randomly.

Pair Corralation between MetLife and MetLife Preferred

Considering the 90-day investment horizon MetLife is expected to generate 3.0 times more return on investment than MetLife Preferred. However, MetLife is 3.0 times more volatile than MetLife Preferred Stock. It trades about 0.08 of its potential returns per unit of risk. MetLife Preferred Stock is currently generating about 0.05 per unit of risk. If you would invest  7,684  in MetLife on September 14, 2024 and sell it today you would earn a total of  615.00  from holding MetLife or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

MetLife  vs.  MetLife Preferred Stock

MetLife

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, MetLife may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MetLife Preferred Stock

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife Preferred Stock are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MetLife Preferred is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MetLife and MetLife Preferred

The main advantage of trading using opposite MetLife and MetLife Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife 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 MetLife 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..