Correlation Between Prudential Financial and MetLife
Can any of the company-specific risk be diversified away by investing in both Prudential Financial and MetLife 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 Prudential Financial and MetLife into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and MetLife, you can compare the effects of market volatilities on Prudential Financial and MetLife 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 Prudential Financial with a short position of MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and MetLife.
Diversification Opportunities for Prudential Financial and MetLife
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prudential and MetLife is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Prudential Financial 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 Prudential Financial are associated (or correlated) with MetLife. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetLife has no effect on the direction of Prudential Financial i.e., Prudential Financial and MetLife go up and down completely randomly.
Pair Corralation between Prudential Financial and MetLife
Considering the 90-day investment horizon Prudential Financial is expected to generate 1.14 times less return on investment than MetLife. But when comparing it to its historical volatility, Prudential Financial is 1.1 times less risky than MetLife. It trades about 0.08 of its potential returns per unit of risk. MetLife is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 8,354 in MetLife on August 24, 2024 and sell it today you would earn a total of 305.00 from holding MetLife or generate 3.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Financial vs. MetLife
Performance |
| Timeline |
| Prudential Financial |
| MetLife |
Prudential Financial and MetLife Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and MetLife
The main advantage of trading using opposite Prudential Financial and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, MetLife 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 will offset losses from the drop in MetLife's long position.| Prudential Financial vs. Manulife Financial Corp | Prudential Financial vs. Brighthouse Financial | Prudential Financial vs. FG Annuities Life | Prudential Financial vs. Jackson Financial |
| MetLife vs. Manulife Financial Corp | MetLife vs. Brighthouse Financial | MetLife vs. FG Annuities Life | MetLife vs. Jackson 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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