Correlation Between Broadridge Financial and MetLife

Can any of the company-specific risk be diversified away by investing in both Broadridge 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 Broadridge Financial and MetLife into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Broadridge Financial Solutions and MetLife, you can compare the effects of market volatilities on Broadridge 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 Broadridge Financial with a short position of MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadridge Financial and MetLife.

Diversification Opportunities for Broadridge Financial and MetLife

0.67

Correlation Coefficient

Broadridge Financial  MetLife

Poor diversification

The 3 months correlation between Broadridge and MetLife is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Broadridge Financial Solutions and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Broadridge 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 Broadridge Financial Solutions 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 Broadridge Financial i.e., Broadridge Financial and MetLife go up and down completely randomly.

Pair Corralation between Broadridge Financial and MetLife

Assuming the 90 days horizon Broadridge Financial Solutions is expected to generate 0.79 times more return on investment than MetLife. However, Broadridge Financial Solutions is 1.26 times less risky than MetLife. It trades about 0.02 of its potential returns per unit of risk. MetLife is currently generating about -0.07 per unit of risk. If you would invest  21,516  in Broadridge Financial Solutions on December 30, 2024 and sell it today you would earn a total of  284.00  from holding Broadridge Financial Solutions or generate 1.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Broadridge Financial Solutions  vs.  MetLife

Broadridge Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Broadridge Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MetLife

Risk-Adjusted Performance

Very Weak

Over the last 90 days MetLife has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Broadridge Financial and MetLife

The main advantage of trading using opposite Broadridge Financial and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadridge 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.

The idea behind Broadridge Financial Solutions and MetLife 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.