Correlation Between MetLife Preferred and CNO Financial

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

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

Diversification Opportunities for MetLife Preferred and CNO Financial

-0.1

Correlation Coefficient

MetLife Preferred  CNO Financial

Good diversification

The 3 months correlation between MetLife and CNO is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding MetLife Preferred Stock and CNO Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNO Financial Group and MetLife Preferred 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 MetLife Preferred Stock are associated (or correlated) with CNO Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNO Financial Group has no effect on the direction of MetLife Preferred i.e., MetLife Preferred and CNO Financial go up and down completely randomly.

Pair Corralation between MetLife Preferred and CNO Financial

Assuming the 90 days trading horizon MetLife Preferred is expected to generate 7.55 times less return on investment than CNO Financial. But when comparing it to its historical volatility, MetLife Preferred Stock is 3.93 times less risky than CNO Financial. It trades about 0.07 of its potential returns per unit of risk. CNO Financial Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,438  in CNO Financial Group on August 31, 2024 and sell it today you would earn a total of  578.00  from holding CNO Financial Group or generate 16.81% return on investment over 90 days.

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

MetLife Preferred Stock  vs.  CNO Financial Group

MetLife Preferred Stock

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife Preferred Stock are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MetLife Preferred is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CNO Financial Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CNO Financial Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, CNO Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MetLife Preferred and CNO Financial

The main advantage of trading using opposite MetLife Preferred and CNO Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife Preferred position performs unexpectedly, CNO Financial 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 CNO Financial will offset losses from the drop in CNO Financial's long position.

The idea behind MetLife Preferred Stock and CNO Financial Group 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.

Check out your portfolio center.

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.