Correlation Between MetLife and Alliance Resource

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

By analyzing existing cross correlation between MetLife and Alliance Resource Partners, you can compare the effects of market volatilities on MetLife and Alliance Resource 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 Alliance Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife and Alliance Resource.

Diversification Opportunities for MetLife and Alliance Resource

0.72

Correlation Coefficient

MetLife  Alliance Resource

Poor diversification

The 3 months correlation between MetLife and Alliance is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Alliance Resource Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Resource 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 Alliance Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Resource has no effect on the direction of MetLife i.e., MetLife and Alliance Resource go up and down completely randomly.

Pair Corralation between MetLife and Alliance Resource

Considering the 90-day investment horizon MetLife is expected to generate 0.96 times more return on investment than Alliance Resource. However, MetLife is 1.05 times less risky than Alliance Resource. It trades about 0.25 of its potential returns per unit of risk. Alliance Resource Partners is currently generating about 0.18 per unit of risk. If you would invest  7,801  in MetLife on September 5, 2024 and sell it today you would earn a total of  771.00  from holding MetLife or generate 9.88% return on investment over 90 days.

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

MetLife  vs.  Alliance Resource Partners

MetLife

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, MetLife unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alliance Resource

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alliance Resource Partners are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain essential indicators, Alliance Resource reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MetLife and Alliance Resource

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

The idea behind MetLife and Alliance Resource Partners 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.