Correlation Between Aflac Incorporated and MetLife Preferred

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

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

Diversification Opportunities for Aflac Incorporated and MetLife Preferred

0.06

Correlation Coefficient

Aflac Incorporated  MetLife Preferred

Significant diversification

The 3 months correlation between Aflac and MetLife is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Aflac Incorporated 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 Aflac Incorporated 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 Aflac Incorporated 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 Aflac Incorporated i.e., Aflac Incorporated and MetLife Preferred go up and down completely randomly.

Pair Corralation between Aflac Incorporated and MetLife Preferred

Considering the 90-day investment horizon Aflac Incorporated is expected to generate 3.06 times more return on investment than MetLife Preferred. However, Aflac Incorporated is 3.06 times more volatile than MetLife Preferred Stock. It trades about 0.11 of its potential returns per unit of risk. MetLife Preferred Stock is currently generating about -0.1 per unit of risk. If you would invest  10,240  in Aflac Incorporated on December 29, 2024 and sell it today you would earn a total of  838.00  from holding Aflac Incorporated or generate 8.18% return on investment over 90 days.

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

Aflac Incorporated  vs.  MetLife Preferred Stock

Aflac Incorporated

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aflac Incorporated are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, Aflac Incorporated may actually be approaching a critical reversion point that can send shares even higher in April 2025.

MetLife Preferred Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days MetLife Preferred Stock has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Aflac Incorporated and MetLife Preferred

The main advantage of trading using opposite Aflac Incorporated and MetLife Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aflac Incorporated 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 Aflac Incorporated 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.