Correlation Between MetLife and Pernod Ricard

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

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

Diversification Opportunities for MetLife and Pernod Ricard

0.09

Correlation Coefficient

MetLife  Pernod Ricard

Significant diversification

The 3 months correlation between MetLife and Pernod is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Pernod Ricard SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pernod Ricard 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 Pernod Ricard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pernod Ricard SA has no effect on the direction of MetLife i.e., MetLife and Pernod Ricard go up and down completely randomly.

Pair Corralation between MetLife and Pernod Ricard

Considering the 90-day investment horizon MetLife is expected to generate 0.87 times more return on investment than Pernod Ricard. However, MetLife is 1.15 times less risky than Pernod Ricard. It trades about -0.01 of its potential returns per unit of risk. Pernod Ricard SA is currently generating about -0.11 per unit of risk. If you would invest  8,099  in MetLife on December 29, 2024 and sell it today you would lose (176.00) from holding MetLife or give up 2.17% of portfolio value over 90 days.

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

MetLife  vs.  Pernod Ricard 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.

Pernod Ricard SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pernod Ricard SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with MetLife and Pernod Ricard

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

The idea behind MetLife and Pernod Ricard 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.