Correlation Between MetLife and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both MetLife and Prudential 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 and Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MetLife and Prudential Financial, you can compare the effects of market volatilities on MetLife and Prudential 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 with a short position of Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife and Prudential Financial.
Diversification Opportunities for MetLife and Prudential Financial
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MetLife and Prudential is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial and MetLife 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 are associated (or correlated) with Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of MetLife i.e., MetLife and Prudential Financial go up and down completely randomly.
Pair Corralation between MetLife and Prudential Financial
Considering the 90-day investment horizon MetLife is expected to generate 1.1 times more return on investment than Prudential Financial. However, MetLife is 1.1 times more volatile than Prudential Financial. It trades about 0.13 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.09 per unit of risk. If you would invest 8,251 in MetLife on August 28, 2024 and sell it today you would earn a total of 483.00 from holding MetLife or generate 5.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MetLife vs. Prudential Financial
Performance |
| Timeline |
| MetLife |
| Prudential Financial |
MetLife and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MetLife and Prudential Financial
The main advantage of trading using opposite MetLife and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife position performs unexpectedly, Prudential 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 Prudential Financial will offset losses from the drop in Prudential Financial's long position.| MetLife vs. Morningstar Unconstrained Allocation | MetLife vs. Via Renewables | MetLife vs. Sitka Gold Corp | MetLife vs. MSCI ACWI exAUCONSUMER |
| Prudential Financial vs. Morningstar Unconstrained Allocation | Prudential Financial vs. Via Renewables | Prudential Financial vs. Sitka Gold Corp | Prudential Financial 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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