Correlation Between MetLife and Prudential PLC
Can any of the company-specific risk be diversified away by investing in both MetLife and Prudential PLC 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 PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MetLife and Prudential PLC ADR, you can compare the effects of market volatilities on MetLife and Prudential PLC 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 PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife and Prudential PLC.
Diversification Opportunities for MetLife and Prudential PLC
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between MetLife and Prudential is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Prudential PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential PLC ADR 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 PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential PLC ADR has no effect on the direction of MetLife i.e., MetLife and Prudential PLC go up and down completely randomly.
Pair Corralation between MetLife and Prudential PLC
Considering the 90-day investment horizon MetLife is expected to generate 1.06 times less return on investment than Prudential PLC. But when comparing it to its historical volatility, MetLife is 1.59 times less risky than Prudential PLC. It trades about 0.22 of its potential returns per unit of risk. Prudential PLC ADR is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,570 in Prudential PLC ADR on November 3, 2024 and sell it today you would earn a total of 93.00 from holding Prudential PLC ADR or generate 5.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MetLife vs. Prudential PLC ADR
Performance |
| Timeline |
| MetLife |
| Prudential PLC ADR |
MetLife and Prudential PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MetLife and Prudential PLC
The main advantage of trading using opposite MetLife and Prudential PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife position performs unexpectedly, Prudential PLC 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 PLC will offset losses from the drop in Prudential PLC's long position.| MetLife vs. Prudential Financial | MetLife vs. Lincoln National | MetLife vs. Aflac Incorporated | MetLife vs. Unum Group |
| Prudential PLC vs. CNO Financial Group | Prudential PLC vs. Jackson Financial | Prudential PLC vs. MetLife Preferred Stock | Prudential PLC vs. Jackson 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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