Correlation Between Globe Life and MetLife
Can any of the company-specific risk be diversified away by investing in both Globe Life 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 Globe Life and MetLife into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Globe Life and MetLife, you can compare the effects of market volatilities on Globe Life 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 Globe Life with a short position of MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globe Life and MetLife.
Diversification Opportunities for Globe Life and MetLife
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Globe and MetLife is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Globe Life and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Globe Life 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 Globe Life 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 Globe Life i.e., Globe Life and MetLife go up and down completely randomly.
Pair Corralation between Globe Life and MetLife
Allowing for the 90-day total investment horizon Globe Life is expected to under-perform the MetLife. But the stock apears to be less risky and, when comparing its historical volatility, Globe Life is 1.33 times less risky than MetLife. The stock trades about -0.23 of its potential returns per unit of risk. The MetLife is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 8,177 in MetLife on September 12, 2024 and sell it today you would lose (3.00) from holding MetLife or give up 0.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Globe Life vs. MetLife
Performance |
| Timeline |
| Globe Life |
| MetLife |
Globe Life and MetLife Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Globe Life and MetLife
The main advantage of trading using opposite Globe Life and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globe Life 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.| Globe Life vs. Lincoln National | Globe Life vs. Aflac Incorporated | Globe Life vs. Unum Group | Globe Life vs. Manulife Financial Corp |
| MetLife vs. Lincoln National | MetLife vs. Aflac Incorporated | MetLife vs. Unum Group | MetLife vs. Manulife Financial Corp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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