Correlation Between MetLife and VR Resources

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

By analyzing existing cross correlation between MetLife and VR Resources, you can compare the effects of market volatilities on MetLife and VR Resources 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 VR Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife and VR Resources.

Diversification Opportunities for MetLife and VR Resources

-0.51

Correlation Coefficient

MetLife  VR Resources

Excellent diversification

The 3 months correlation between MetLife and VRRCF is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and VR Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VR Resources 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 VR Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VR Resources has no effect on the direction of MetLife i.e., MetLife and VR Resources go up and down completely randomly.

Pair Corralation between MetLife and VR Resources

Considering the 90-day investment horizon MetLife is expected to generate 1.44 times less return on investment than VR Resources. But when comparing it to its historical volatility, MetLife is 8.47 times less risky than VR Resources. It trades about 0.08 of its potential returns per unit of risk. VR Resources is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  18.00  in VR Resources on September 12, 2024 and sell it today you would lose (13.66) from holding VR Resources or give up 75.89% of portfolio value over 90 days.

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

MetLife  vs.  VR Resources

MetLife

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, MetLife may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VR Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VR Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, VR Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MetLife and VR Resources

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

The idea behind MetLife and VR Resources 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 Transaction History module to view history of all your transactions and understand their impact on performance.