Correlation Between MetLife Preferred and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both MetLife Preferred and Prudential Financial 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 Preferred and Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MetLife Preferred Stock and Prudential Financial, you can compare the effects of market volatilities on MetLife Preferred and Prudential Financial 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 Preferred with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife Preferred and Prudential Financial.
Diversification Opportunities for MetLife Preferred and Prudential Financial
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MetLife and Prudential is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding MetLife Preferred Stock and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and MetLife Preferred 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 Preferred Stock are associated (or correlated) with Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of MetLife Preferred i.e., MetLife Preferred and Prudential Financial go up and down completely randomly.
Pair Corralation between MetLife Preferred and Prudential Financial
Assuming the 90 days trading horizon MetLife Preferred Stock is expected to under-perform the Prudential Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, MetLife Preferred Stock is 5.13 times less risky than Prudential Financial. The preferred stock trades about -0.03 of its potential returns per unit of risk. The Prudential Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 11,827 in Prudential Financial on November 3, 2024 and sell it today you would earn a total of 239.00 from holding Prudential Financial or generate 2.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MetLife Preferred Stock vs. Prudential Financial
Performance |
| Timeline |
| MetLife Preferred Stock |
| Prudential Financial |
MetLife Preferred and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MetLife Preferred and Prudential Financial
The main advantage of trading using opposite MetLife Preferred and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife Preferred position performs unexpectedly, Prudential Financial 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 Prudential Financial will offset losses from the drop in Prudential Financial's long position.| MetLife Preferred vs. Assurant | MetLife Preferred vs. Affiliated Managers Group, | MetLife Preferred vs. The Carlyle Group | MetLife Preferred vs. Affiliated Managers Group, |
| Prudential Financial vs. Lincoln National | Prudential Financial vs. Aflac Incorporated | Prudential Financial vs. Brighthouse Financial | Prudential Financial vs. Unum Group |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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