Correlation Between MetLife Preferred and Jackson Financial
Can any of the company-specific risk be diversified away by investing in both MetLife Preferred and Jackson 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 Jackson 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 Jackson Financial, you can compare the effects of market volatilities on MetLife Preferred and Jackson 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 Jackson Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife Preferred and Jackson Financial.
Diversification Opportunities for MetLife Preferred and Jackson Financial
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between MetLife and Jackson is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding MetLife Preferred Stock and Jackson Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jackson 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 Jackson Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jackson Financial has no effect on the direction of MetLife Preferred i.e., MetLife Preferred and Jackson Financial go up and down completely randomly.
Pair Corralation between MetLife Preferred and Jackson Financial
Assuming the 90 days trading horizon MetLife Preferred is expected to generate 2.01 times less return on investment than Jackson Financial. But when comparing it to its historical volatility, MetLife Preferred Stock is 1.47 times less risky than Jackson Financial. It trades about 0.04 of its potential returns per unit of risk. Jackson Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,208 in Jackson Financial on August 28, 2024 and sell it today you would earn a total of 514.00 from holding Jackson Financial or generate 23.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 88.08% |
| Values | Daily Returns |
MetLife Preferred Stock vs. Jackson Financial
Performance |
| Timeline |
| MetLife Preferred Stock |
| Jackson Financial |
MetLife Preferred and Jackson Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MetLife Preferred and Jackson Financial
The main advantage of trading using opposite MetLife Preferred and Jackson Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife Preferred position performs unexpectedly, Jackson 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 Jackson Financial will offset losses from the drop in Jackson Financial's long position.The idea behind MetLife Preferred Stock and Jackson Financial 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.| Jackson Financial vs. MetLife Preferred Stock | Jackson Financial vs. MetLife Preferred Stock | Jackson Financial vs. Brighthouse 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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