Correlation Between MetLife and Aflac Incorporated

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

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

Diversification Opportunities for MetLife and Aflac Incorporated

0.37

Correlation Coefficient

MetLife  Aflac Incorporated

Weak diversification

The 3 months correlation between MetLife and Aflac is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Aflac Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aflac Incorporated and MetLife 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 are associated (or correlated) with Aflac Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aflac Incorporated has no effect on the direction of MetLife i.e., MetLife and Aflac Incorporated go up and down completely randomly.

Pair Corralation between MetLife and Aflac Incorporated

Considering the 90-day investment horizon MetLife is expected to generate 2.63 times less return on investment than Aflac Incorporated. In addition to that, MetLife is 1.18 times more volatile than Aflac Incorporated. It trades about 0.04 of its total potential returns per unit of risk. Aflac Incorporated is currently generating about 0.11 per unit of volatility. If you would invest  10,240  in Aflac Incorporated on December 28, 2024 and sell it today you would earn a total of  838.00  from holding Aflac Incorporated or generate 8.18% return on investment over 90 days.

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

MetLife  vs.  Aflac Incorporated

MetLife

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, MetLife is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Aflac Incorporated

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aflac Incorporated are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, Aflac Incorporated may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with MetLife and Aflac Incorporated

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

The idea behind MetLife and Aflac Incorporated 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.