Correlation Between MetLife and 06406RAU1

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Can any of the company-specific risk be diversified away by investing in both MetLife and 06406RAU1 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 06406RAU1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MetLife and BK 165 14 JUL 28, you can compare the effects of market volatilities on MetLife and 06406RAU1 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 06406RAU1. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife and 06406RAU1.

Diversification Opportunities for MetLife and 06406RAU1

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between MetLife and 06406RAU1 is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and BK 165 14 JUL 28 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BK 165 14 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 06406RAU1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BK 165 14 has no effect on the direction of MetLife i.e., MetLife and 06406RAU1 go up and down completely randomly.

Pair Corralation between MetLife and 06406RAU1

Considering the 90-day investment horizon MetLife is expected to generate 2.36 times more return on investment than 06406RAU1. However, MetLife is 2.36 times more volatile than BK 165 14 JUL 28. It trades about 0.04 of its potential returns per unit of risk. BK 165 14 JUL 28 is currently generating about 0.02 per unit of risk. If you would invest  6,865  in MetLife on September 3, 2024 and sell it today you would earn a total of  1,958  from holding MetLife or generate 28.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy59.6%
ValuesDaily Returns

MetLife  vs.  BK 165 14 JUL 28

 Performance 
       Timeline  
MetLife 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, MetLife unveiled solid returns over the last few months and may actually be approaching a breakup point.
BK 165 14 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BK 165 14 JUL 28 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 06406RAU1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

MetLife and 06406RAU1 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MetLife and 06406RAU1

The main advantage of trading using opposite MetLife and 06406RAU1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife position performs unexpectedly, 06406RAU1 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 06406RAU1 will offset losses from the drop in 06406RAU1's long position.
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The idea behind MetLife and BK 165 14 JUL 28 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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