Correlation Between Jackson Financial and MetLife Preferred

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

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

Diversification Opportunities for Jackson Financial and MetLife Preferred

0.45

Correlation Coefficient

Jackson Financial  MetLife Preferred

Very weak diversification

The 3 months correlation between Jackson and MetLife is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Jackson Financial 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 Jackson Financial 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 Jackson Financial 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 Jackson Financial i.e., Jackson Financial and MetLife Preferred go up and down completely randomly.

Pair Corralation between Jackson Financial and MetLife Preferred

Considering the 90-day investment horizon Jackson Financial is expected to under-perform the MetLife Preferred. In addition to that, Jackson Financial is 3.03 times more volatile than MetLife Preferred Stock. It trades about -0.24 of its total potential returns per unit of risk. MetLife Preferred Stock is currently generating about -0.01 per unit of volatility. If you would invest  2,450  in MetLife Preferred Stock on October 7, 2024 and sell it today you would lose (13.00) from holding MetLife Preferred Stock or give up 0.53% of portfolio value over 90 days.

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

Jackson Financial  vs.  MetLife Preferred Stock

Jackson Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jackson Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Jackson Financial is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the 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 Jackson Financial and MetLife Preferred

The main advantage of trading using opposite Jackson Financial and MetLife Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jackson Financial 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 Jackson Financial 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.