Correlation Between MetLife and AUTOMATIC

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

Diversification Opportunities for MetLife and AUTOMATIC

-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between MetLife and AUTOMATIC is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and AUTOMATIC DATA PROCESSING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUTOMATIC DATA PROCESSING 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 AUTOMATIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUTOMATIC DATA PROCESSING has no effect on the direction of MetLife i.e., MetLife and AUTOMATIC go up and down completely randomly.

Pair Corralation between MetLife and AUTOMATIC

Considering the 90-day investment horizon MetLife is expected to generate 2.51 times more return on investment than AUTOMATIC. However, MetLife is 2.51 times more volatile than AUTOMATIC DATA PROCESSING. It trades about 0.04 of its potential returns per unit of risk. AUTOMATIC DATA PROCESSING is currently generating about 0.0 per unit of risk. If you would invest  6,722  in MetLife on September 5, 2024 and sell it today you would earn a total of  1,850  from holding MetLife or generate 27.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy96.97%
ValuesDaily Returns

MetLife  vs.  AUTOMATIC DATA PROCESSING

 Performance 
       Timeline  
MetLife 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, MetLife unveiled solid returns over the last few months and may actually be approaching a breakup point.
AUTOMATIC DATA PROCESSING 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days AUTOMATIC DATA PROCESSING has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for AUTOMATIC DATA PROCESSING investors.

MetLife and AUTOMATIC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MetLife and AUTOMATIC

The main advantage of trading using opposite MetLife and AUTOMATIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife position performs unexpectedly, AUTOMATIC 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 AUTOMATIC will offset losses from the drop in AUTOMATIC's long position.
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The idea behind MetLife and AUTOMATIC DATA PROCESSING 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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