Correlation Between Merck and MetLife Preferred
Can any of the company-specific risk be diversified away by investing in both Merck and MetLife Preferred 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 Merck and MetLife Preferred into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and MetLife Preferred Stock, you can compare the effects of market volatilities on Merck and MetLife Preferred 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 Merck with a short position of MetLife Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and MetLife Preferred.
Diversification Opportunities for Merck and MetLife Preferred
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Merck and MetLife is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and MetLife Preferred Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife Preferred Stock and Merck 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 Merck Company are associated (or correlated) with MetLife Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetLife Preferred Stock has no effect on the direction of Merck i.e., Merck and MetLife Preferred go up and down completely randomly.
Pair Corralation between Merck and MetLife Preferred
Considering the 90-day investment horizon Merck Company is expected to under-perform the MetLife Preferred. In addition to that, Merck is 2.27 times more volatile than MetLife Preferred Stock. It trades about -0.1 of its total potential returns per unit of risk. MetLife Preferred Stock is currently generating about 0.01 per unit of volatility. If you would invest 2,450 in MetLife Preferred Stock on August 28, 2024 and sell it today you would earn a total of 3.00 from holding MetLife Preferred Stock or generate 0.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. MetLife Preferred Stock
Performance |
| Timeline |
| Merck Company |
| MetLife Preferred Stock |
Merck and MetLife Preferred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and MetLife Preferred
The main advantage of trading using opposite Merck and MetLife Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, MetLife Preferred 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 MetLife Preferred will offset losses from the drop in MetLife Preferred's long position.| Merck vs. Capricor Therapeutics | Merck vs. Soleno Therapeutics | Merck vs. Bio Path Holdings | Merck vs. Moleculin Biotech |
| MetLife Preferred vs. Brighthouse Financial | MetLife Preferred vs. Brighthouse Financial | MetLife Preferred vs. MetLife Preferred Stock | MetLife Preferred vs. Brighthouse Financial |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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