Correlation Between MetLife Preferred and Bank of America
Can any of the company-specific risk be diversified away by investing in both MetLife Preferred and Bank of America 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 Bank of America 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 Bank of America, you can compare the effects of market volatilities on MetLife Preferred and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife Preferred and Bank of America.
Diversification Opportunities for MetLife Preferred and Bank of America
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MetLife and Bank is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding MetLife Preferred Stock and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of MetLife Preferred i.e., MetLife Preferred and Bank of America go up and down completely randomly.
Pair Corralation between MetLife Preferred and Bank of America
Assuming the 90 days trading horizon MetLife Preferred Stock is expected to generate 0.89 times more return on investment than Bank of America. However, MetLife Preferred Stock is 1.12 times less risky than Bank of America. It trades about 0.03 of its potential returns per unit of risk. Bank of America is currently generating about 0.01 per unit of risk. If you would invest 2,344 in MetLife Preferred Stock on November 5, 2024 and sell it today you would earn a total of 103.00 from holding MetLife Preferred Stock or generate 4.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MetLife Preferred Stock vs. Bank of America
Performance |
| Timeline |
| MetLife Preferred Stock |
| Bank of America |
MetLife Preferred and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MetLife Preferred and Bank of America
The main advantage of trading using opposite MetLife Preferred and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife Preferred position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| MetLife Preferred vs. Jackson Financial | MetLife Preferred vs. MetLife Preferred Stock | MetLife Preferred vs. Brighthouse Financial | MetLife Preferred vs. Brighthouse Financial |
| Bank of America vs. Bank of America | Bank of America vs. Wells Fargo | Bank of America vs. Capital One Financial | Bank of America vs. Capital One Financial |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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