Correlation Between MetLife Preferred and Prudential Public
Can any of the company-specific risk be diversified away by investing in both MetLife Preferred and Prudential Public 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 Public 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 Public Limited, you can compare the effects of market volatilities on MetLife Preferred and Prudential Public 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 Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife Preferred and Prudential Public.
Diversification Opportunities for MetLife Preferred and Prudential Public
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MetLife and Prudential is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding MetLife Preferred Stock and Prudential Public Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Public 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 Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Public has no effect on the direction of MetLife Preferred i.e., MetLife Preferred and Prudential Public go up and down completely randomly.
Pair Corralation between MetLife Preferred and Prudential Public
Assuming the 90 days trading horizon MetLife Preferred Stock is expected to generate 0.44 times more return on investment than Prudential Public. However, MetLife Preferred Stock is 2.27 times less risky than Prudential Public. It trades about 0.03 of its potential returns per unit of risk. Prudential Public Limited is currently generating about -0.06 per unit of risk. If you would invest 1,960 in MetLife Preferred Stock on August 28, 2024 and sell it today you would earn a total of 173.00 from holding MetLife Preferred Stock or generate 8.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MetLife Preferred Stock vs. Prudential Public Limited
Performance |
| Timeline |
| MetLife Preferred Stock |
| Prudential Public |
MetLife Preferred and Prudential Public Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MetLife Preferred and Prudential Public
The main advantage of trading using opposite MetLife Preferred and Prudential Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife Preferred position performs unexpectedly, Prudential Public 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 Public will offset losses from the drop in Prudential Public's long position.The idea behind MetLife Preferred Stock and Prudential Public Limited 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.| Prudential Public vs. Morningstar Unconstrained Allocation | Prudential Public vs. Via Renewables | Prudential Public vs. Sitka Gold Corp | Prudential Public vs. MSCI ACWI exAUCONSUMER |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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