Correlation Between Great-West Lifeco and MetLife

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

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

Diversification Opportunities for Great-West Lifeco and MetLife

-0.4

Correlation Coefficient

Great-West Lifeco  MetLife

Very good diversification

The 3 months correlation between Great-West and MetLife is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Great West Lifeco and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Great-West Lifeco 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 Great West Lifeco 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 Great-West Lifeco i.e., Great-West Lifeco and MetLife go up and down completely randomly.

Pair Corralation between Great-West Lifeco and MetLife

Assuming the 90 days horizon Great West Lifeco is expected to generate 1.12 times more return on investment than MetLife. However, Great-West Lifeco is 1.12 times more volatile than MetLife. It trades about 0.11 of its potential returns per unit of risk. MetLife is currently generating about -0.07 per unit of risk. If you would invest  3,125  in Great West Lifeco on December 30, 2024 and sell it today you would earn a total of  395.00  from holding Great West Lifeco or generate 12.64% return on investment over 90 days.

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

Great West Lifeco  vs.  MetLife

Great West Lifeco

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Lifeco are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Great-West Lifeco reported solid returns over the last few months and may actually be approaching a breakup point.

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 Great-West Lifeco and MetLife

The main advantage of trading using opposite Great-West Lifeco and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great-West Lifeco 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 Great West Lifeco 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.