Correlation Between Alliance Resource and MetLife

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

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

Diversification Opportunities for Alliance Resource and MetLife

0.72

Correlation Coefficient

Alliance Resource  MetLife

Poor diversification

The 3 months correlation between Alliance and MetLife is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Resource Partners and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Alliance Resource 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 Alliance Resource Partners 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 Alliance Resource i.e., Alliance Resource and MetLife go up and down completely randomly.

Pair Corralation between Alliance Resource and MetLife

Given the investment horizon of 90 days Alliance Resource is expected to generate 1.36 times less return on investment than MetLife. In addition to that, Alliance Resource is 1.05 times more volatile than MetLife. It trades about 0.18 of its total potential returns per unit of risk. MetLife is currently generating about 0.25 per unit of volatility. If you would invest  7,801  in MetLife on September 5, 2024 and sell it today you would earn a total of  771.00  from holding MetLife or generate 9.88% return on investment over 90 days.

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

Alliance Resource Partners  vs.  MetLife

Alliance Resource

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Resource Partners are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain essential indicators, Alliance Resource reported solid returns over the last few months and may actually be approaching a breakup point.

MetLife

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, MetLife unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alliance Resource and MetLife

The main advantage of trading using opposite Alliance Resource and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Resource 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 Alliance Resource Partners 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.