Correlation Between MetLife and Exxon
Can any of the company-specific risk be diversified away by investing in both MetLife and Exxon 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 Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MetLife and Exxon Mobil Corp, you can compare the effects of market volatilities on MetLife and Exxon 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 Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife and Exxon.
Diversification Opportunities for MetLife and Exxon
Poor diversification
The 3 months correlation between MetLife and Exxon is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of MetLife i.e., MetLife and Exxon go up and down completely randomly.
Pair Corralation between MetLife and Exxon
Considering the 90-day investment horizon MetLife is expected to generate 1.08 times more return on investment than Exxon. However, MetLife is 1.08 times more volatile than Exxon Mobil Corp. It trades about 0.1 of its potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.04 per unit of risk. If you would invest 5,977 in MetLife on September 4, 2024 and sell it today you would earn a total of 2,711 from holding MetLife or generate 45.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MetLife vs. Exxon Mobil Corp
Performance |
| Timeline |
| MetLife |
| Exxon Mobil Corp |
MetLife and Exxon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MetLife and Exxon
The main advantage of trading using opposite MetLife and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.| MetLife vs. Aflac Incorporated | MetLife vs. Manulife Financial Corp | MetLife vs. Jackson Financial | MetLife vs. Globe Life |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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