Correlation Between MetLife Preferred and Brown Brown
Can any of the company-specific risk be diversified away by investing in both MetLife Preferred and Brown Brown 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 Brown Brown 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 Brown Brown, you can compare the effects of market volatilities on MetLife Preferred and Brown Brown 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 Brown Brown. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife Preferred and Brown Brown.
Diversification Opportunities for MetLife Preferred and Brown Brown
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MetLife and Brown is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding MetLife Preferred Stock and Brown Brown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Brown 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 Brown Brown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Brown has no effect on the direction of MetLife Preferred i.e., MetLife Preferred and Brown Brown go up and down completely randomly.
Pair Corralation between MetLife Preferred and Brown Brown
Assuming the 90 days trading horizon MetLife Preferred Stock is expected to under-perform the Brown Brown. But the preferred stock apears to be less risky and, when comparing its historical volatility, MetLife Preferred Stock is 1.14 times less risky than Brown Brown. The preferred stock trades about -0.18 of its potential returns per unit of risk. The Brown Brown is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 10,321 in Brown Brown on August 28, 2024 and sell it today you would earn a total of 853.00 from holding Brown Brown or generate 8.26% 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. Brown Brown
Performance |
| Timeline |
| MetLife Preferred Stock |
| Brown Brown |
MetLife Preferred and Brown Brown Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MetLife Preferred and Brown Brown
The main advantage of trading using opposite MetLife Preferred and Brown Brown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife Preferred position performs unexpectedly, Brown Brown 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 Brown Brown will offset losses from the drop in Brown Brown's long position.The idea behind MetLife Preferred Stock and Brown Brown 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.| Brown Brown vs. Marsh McLennan Companies | Brown Brown vs. Aon PLC | Brown Brown vs. Willis Towers Watson | Brown Brown vs. Erie Indemnity |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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