Correlation Between MetLife Preferred and Prudential Public

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

Diversification Opportunities for MetLife Preferred and Prudential Public

0.66

Correlation Coefficient

MetLife Preferred  Prudential Public

Poor diversification

The 3 months correlation between MetLife and Prudential is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding MetLife Preferred Stock and Prudential Public Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Public 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 Prudential Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Public has no effect on the direction of MetLife Preferred i.e., MetLife Preferred and Prudential Public go up and down completely randomly.

Pair Corralation between MetLife Preferred and Prudential Public

Assuming the 90 days trading horizon MetLife Preferred Stock is expected to under-perform the Prudential Public. But the preferred stock apears to be less risky and, when comparing its historical volatility, MetLife Preferred Stock is 2.7 times less risky than Prudential Public. The preferred stock trades about -0.05 of its potential returns per unit of risk. The Prudential Public Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,667  in Prudential Public Limited on August 31, 2024 and sell it today you would lose (34.00) from holding Prudential Public Limited or give up 2.04% of portfolio value over 90 days.

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

MetLife Preferred Stock  vs.  Prudential Public Limited

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.

Prudential Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Public Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Prudential Public is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with MetLife Preferred and Prudential Public

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

The idea behind MetLife Preferred Stock and Prudential Public Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.