Correlation Between MetLife Preferred and Equitable Holdings

Can any of the company-specific risk be diversified away by investing in both MetLife Preferred and Equitable Holdings 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 Equitable Holdings 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 Equitable Holdings, you can compare the effects of market volatilities on MetLife Preferred and Equitable Holdings 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 Equitable Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife Preferred and Equitable Holdings.

Diversification Opportunities for MetLife Preferred and Equitable Holdings

0.9

Correlation Coefficient

MetLife Preferred  Equitable Holdings

Almost no diversification

The 3 months correlation between MetLife and Equitable is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding MetLife Preferred Stock and Equitable Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equitable Holdings 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 Equitable Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equitable Holdings has no effect on the direction of MetLife Preferred i.e., MetLife Preferred and Equitable Holdings go up and down completely randomly.

Pair Corralation between MetLife Preferred and Equitable Holdings

Assuming the 90 days trading horizon MetLife Preferred Stock is expected to generate 1.13 times more return on investment than Equitable Holdings. However, MetLife Preferred is 1.13 times more volatile than Equitable Holdings. It trades about -0.03 of its potential returns per unit of risk. Equitable Holdings is currently generating about -0.04 per unit of risk. If you would invest  2,139  in MetLife Preferred Stock on August 31, 2024 and sell it today you would lose (35.00) from holding MetLife Preferred Stock or give up 1.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

MetLife Preferred Stock  vs.  Equitable Holdings

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. Despite nearly stable basic indicators, MetLife Preferred is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Equitable Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equitable Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, Equitable Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MetLife Preferred and Equitable Holdings

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

The idea behind MetLife Preferred Stock and Equitable Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.