Correlation Between MetLife and Ricoh

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Can any of the company-specific risk be diversified away by investing in both MetLife and Ricoh 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 Ricoh into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MetLife and Ricoh Company, you can compare the effects of market volatilities on MetLife and Ricoh 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 Ricoh. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife and Ricoh.

Diversification Opportunities for MetLife and Ricoh

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between MetLife and Ricoh is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Ricoh Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ricoh Company 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 Ricoh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ricoh Company has no effect on the direction of MetLife i.e., MetLife and Ricoh go up and down completely randomly.

Pair Corralation between MetLife and Ricoh

Considering the 90-day investment horizon MetLife is expected to generate 2.13 times less return on investment than Ricoh. But when comparing it to its historical volatility, MetLife is 2.07 times less risky than Ricoh. It trades about 0.08 of its potential returns per unit of risk. Ricoh Company is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  747.00  in Ricoh Company on September 12, 2024 and sell it today you would earn a total of  447.00  from holding Ricoh Company or generate 59.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy93.95%
ValuesDaily Returns

MetLife  vs.  Ricoh Company

 Performance 
       Timeline  
MetLife 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, MetLife may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Ricoh Company 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Ricoh Company are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Ricoh showed solid returns over the last few months and may actually be approaching a breakup point.

MetLife and Ricoh Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MetLife and Ricoh

The main advantage of trading using opposite MetLife and Ricoh positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife position performs unexpectedly, Ricoh 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 Ricoh will offset losses from the drop in Ricoh's long position.
The idea behind MetLife and Ricoh Company 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.
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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