Correlation Between American Equity and MetLife Preferred

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

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

Diversification Opportunities for American Equity and MetLife Preferred

-0.65

Correlation Coefficient

American Equity  MetLife Preferred

Excellent diversification

The 3 months correlation between American and MetLife is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding American Equity Investment 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 American Equity 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 American Equity Investment 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 American Equity i.e., American Equity and MetLife Preferred go up and down completely randomly.

Pair Corralation between American Equity and MetLife Preferred

If you would invest  5,375  in American Equity Investment on August 31, 2024 and sell it today you would earn a total of  0.00  from holding American Equity Investment or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

American Equity Investment  vs.  MetLife Preferred Stock

American Equity Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Equity Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, American Equity is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

MetLife Preferred Stock

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with American Equity and MetLife Preferred

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

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.