Correlation Between Aflac Incorporated and MetLife
Can any of the company-specific risk be diversified away by investing in both Aflac Incorporated and MetLife 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 Aflac Incorporated and MetLife into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aflac Incorporated and MetLife, you can compare the effects of market volatilities on Aflac Incorporated and MetLife 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 Aflac Incorporated with a short position of MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aflac Incorporated and MetLife.
Diversification Opportunities for Aflac Incorporated and MetLife
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aflac and MetLife is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Aflac Incorporated and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Aflac Incorporated 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 Aflac Incorporated are associated (or correlated) with MetLife. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetLife has no effect on the direction of Aflac Incorporated i.e., Aflac Incorporated and MetLife go up and down completely randomly.
Pair Corralation between Aflac Incorporated and MetLife
Considering the 90-day investment horizon Aflac Incorporated is expected to generate 1.66 times less return on investment than MetLife. But when comparing it to its historical volatility, Aflac Incorporated is 1.49 times less risky than MetLife. It trades about 0.12 of its potential returns per unit of risk. MetLife is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 8,251 in MetLife on August 28, 2024 and sell it today you would earn a total of 483.00 from holding MetLife or generate 5.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aflac Incorporated vs. MetLife
Performance |
| Timeline |
| Aflac Incorporated |
| MetLife |
Aflac Incorporated and MetLife Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aflac Incorporated and MetLife
The main advantage of trading using opposite Aflac Incorporated and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aflac Incorporated position performs unexpectedly, MetLife 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 will offset losses from the drop in MetLife's long position.| Aflac Incorporated vs. Morningstar Unconstrained Allocation | Aflac Incorporated vs. Via Renewables | Aflac Incorporated vs. Sitka Gold Corp | Aflac Incorporated vs. MSCI ACWI exAUCONSUMER |
| MetLife vs. Morningstar Unconstrained Allocation | MetLife vs. Via Renewables | MetLife vs. Sitka Gold Corp | MetLife vs. MSCI ACWI exAUCONSUMER |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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