Correlation Between MetLife and ERAMET SA

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

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

Diversification Opportunities for MetLife and ERAMET SA

0.28

Correlation Coefficient

MetLife  ERAMET SA

Modest diversification

The 3 months correlation between MetLife and ERAMET is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and ERAMET SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ERAMET SA 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 ERAMET SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ERAMET SA has no effect on the direction of MetLife i.e., MetLife and ERAMET SA go up and down completely randomly.

Pair Corralation between MetLife and ERAMET SA

Considering the 90-day investment horizon MetLife is expected to under-perform the ERAMET SA. In addition to that, MetLife is 6.31 times more volatile than ERAMET SA. It trades about -0.01 of its total potential returns per unit of risk. ERAMET SA is currently generating about 0.04 per unit of volatility. If you would invest  5,697  in ERAMET SA on December 29, 2024 and sell it today you would earn a total of  32.00  from holding ERAMET SA or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.08%
Values	Daily Returns

MetLife  vs.  ERAMET SA

MetLife

Risk-Adjusted Performance

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.

ERAMET SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ERAMET SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ERAMET SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MetLife and ERAMET SA

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

The idea behind MetLife and ERAMET SA 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.