Correlation Between MetLife and Sumitomo Electric
Can any of the company-specific risk be diversified away by investing in both MetLife and Sumitomo Electric 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 Sumitomo Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MetLife and Sumitomo Electric Industries, you can compare the effects of market volatilities on MetLife and Sumitomo Electric 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 Sumitomo Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife and Sumitomo Electric.
Diversification Opportunities for MetLife and Sumitomo Electric
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MetLife and Sumitomo is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Sumitomo Electric Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Electric 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 Sumitomo Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Electric has no effect on the direction of MetLife i.e., MetLife and Sumitomo Electric go up and down completely randomly.
Pair Corralation between MetLife and Sumitomo Electric
Considering the 90-day investment horizon MetLife is expected to generate 11.92 times more return on investment than Sumitomo Electric. However, MetLife is 11.92 times more volatile than Sumitomo Electric Industries. It trades about 0.12 of its potential returns per unit of risk. Sumitomo Electric Industries is currently generating about 0.09 per unit of risk. If you would invest 6,900 in MetLife on September 5, 2024 and sell it today you would earn a total of 1,672 from holding MetLife or generate 24.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MetLife vs. Sumitomo Electric Industries
Performance |
| Timeline |
| MetLife |
| Sumitomo Electric |
MetLife and Sumitomo Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MetLife and Sumitomo Electric
The main advantage of trading using opposite MetLife and Sumitomo Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife position performs unexpectedly, Sumitomo Electric 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 Sumitomo Electric will offset losses from the drop in Sumitomo Electric's long position.| MetLife vs. Aflac Incorporated | MetLife vs. Manulife Financial Corp | MetLife vs. Jackson Financial | MetLife vs. Globe Life |
| Sumitomo Electric vs. OppFi Inc | Sumitomo Electric vs. Fortinet | Sumitomo Electric vs. Brera Holdings PLC | Sumitomo Electric vs. MetLife |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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