Correlation Between MetLife Preferred and RenaissanceRe Holdings
Can any of the company-specific risk be diversified away by investing in both MetLife Preferred and RenaissanceRe Holdings 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 RenaissanceRe Holdings 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 RenaissanceRe Holdings, you can compare the effects of market volatilities on MetLife Preferred and RenaissanceRe Holdings 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 RenaissanceRe Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife Preferred and RenaissanceRe Holdings.
Diversification Opportunities for MetLife Preferred and RenaissanceRe Holdings
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between MetLife and RenaissanceRe is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding MetLife Preferred Stock and RenaissanceRe Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RenaissanceRe Holdings 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 RenaissanceRe Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RenaissanceRe Holdings has no effect on the direction of MetLife Preferred i.e., MetLife Preferred and RenaissanceRe Holdings go up and down completely randomly.
Pair Corralation between MetLife Preferred and RenaissanceRe Holdings
Assuming the 90 days trading horizon MetLife Preferred Stock is expected to under-perform the RenaissanceRe Holdings. In addition to that, MetLife Preferred is 1.38 times more volatile than RenaissanceRe Holdings. It trades about -0.13 of its total potential returns per unit of risk. RenaissanceRe Holdings is currently generating about 0.14 per unit of volatility. If you would invest 2,426 in RenaissanceRe Holdings on August 27, 2024 and sell it today you would earn a total of 32.00 from holding RenaissanceRe Holdings or generate 1.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MetLife Preferred Stock vs. RenaissanceRe Holdings
Performance |
| Timeline |
| MetLife Preferred Stock |
| RenaissanceRe Holdings |
MetLife Preferred and RenaissanceRe Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MetLife Preferred and RenaissanceRe Holdings
The main advantage of trading using opposite MetLife Preferred and RenaissanceRe Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife Preferred position performs unexpectedly, RenaissanceRe Holdings 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 RenaissanceRe Holdings will offset losses from the drop in RenaissanceRe Holdings' long position.The idea behind MetLife Preferred Stock and RenaissanceRe Holdings 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.| RenaissanceRe Holdings vs. SiriusPoint | RenaissanceRe Holdings vs. Greenlight Capital Re | RenaissanceRe Holdings vs. Maiden Holdings | RenaissanceRe Holdings vs. Renaissancere Holdings |
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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