Correlation Between MetLife and Midwest Holding

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

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

Diversification Opportunities for MetLife and Midwest Holding

-0.21

Correlation Coefficient

MetLife  Midwest Holding

Very good diversification

The 3 months correlation between MetLife and Midwest is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Midwest Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midwest Holding 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 Midwest Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midwest Holding has no effect on the direction of MetLife i.e., MetLife and Midwest Holding go up and down completely randomly.

Pair Corralation between MetLife and Midwest Holding

If you would invest  8,171  in MetLife on October 24, 2024 and sell it today you would earn a total of  517.00  from holding MetLife or generate 6.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.56%
Values	Daily Returns

MetLife  vs.  Midwest Holding

MetLife

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 3 (%) 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.

Midwest Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Midwest Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Midwest Holding is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MetLife and Midwest Holding

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

The idea behind MetLife and Midwest Holding 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.