Correlation Between Atlantic American and MetLife Preferred

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

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

Diversification Opportunities for Atlantic American and MetLife Preferred

-0.83

Correlation Coefficient

Atlantic American  MetLife Preferred

Pay attention - limited upside

The 3 months correlation between Atlantic and MetLife is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Atlantic American 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 Atlantic American 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 Atlantic American 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 Atlantic American i.e., Atlantic American and MetLife Preferred go up and down completely randomly.

Pair Corralation between Atlantic American and MetLife Preferred

Given the investment horizon of 90 days Atlantic American is expected to generate 2.29 times less return on investment than MetLife Preferred. In addition to that, Atlantic American is 9.79 times more volatile than MetLife Preferred Stock. It trades about 0.0 of its total potential returns per unit of risk. MetLife Preferred Stock is currently generating about 0.07 per unit of volatility. If you would invest  2,481  in MetLife Preferred Stock on October 10, 2024 and sell it today you would earn a total of  11.00  from holding MetLife Preferred Stock or generate 0.44% return on investment over 90 days.

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

Atlantic American  vs.  MetLife Preferred Stock

Atlantic American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlantic American has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Atlantic American is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

MetLife Preferred Stock

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife Preferred Stock are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MetLife Preferred is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Atlantic American and MetLife Preferred

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

The idea behind Atlantic American and MetLife Preferred Stock 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.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.