Correlation Between MetLife and Baron Capital

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

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

Diversification Opportunities for MetLife and Baron Capital

0.39

Correlation Coefficient

MetLife  Baron Capital

Weak diversification

The 3 months correlation between MetLife and Baron is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Baron Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Capital 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 Baron Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Capital has no effect on the direction of MetLife i.e., MetLife and Baron Capital go up and down completely randomly.

Pair Corralation between MetLife and Baron Capital

Considering the 90-day investment horizon MetLife is expected to generate 42.67 times less return on investment than Baron Capital. But when comparing it to its historical volatility, MetLife is 15.97 times less risky than Baron Capital. It trades about 0.0 of its potential returns per unit of risk. Baron Capital is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.03  in Baron Capital on December 1, 2024 and sell it today you would lose (0.02) from holding Baron Capital or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

MetLife  vs.  Baron Capital

MetLife

Risk-Adjusted Performance

Very Weak

Over the last 90 days MetLife has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Baron Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baron Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively unsteady basic indicators, Baron Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MetLife and Baron Capital

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

The idea behind MetLife and Baron Capital 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.