Correlation Between MetLife and Shenzhen Expressway

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

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

Diversification Opportunities for MetLife and Shenzhen Expressway

0.31

Correlation Coefficient

MetLife  Shenzhen Expressway

Weak diversification

The 3 months correlation between MetLife and Shenzhen is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Shenzhen Expressway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Expressway 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 Shenzhen Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Expressway has no effect on the direction of MetLife i.e., MetLife and Shenzhen Expressway go up and down completely randomly.

Pair Corralation between MetLife and Shenzhen Expressway

Considering the 90-day investment horizon MetLife is expected to generate 2.47 times more return on investment than Shenzhen Expressway. However, MetLife is 2.47 times more volatile than Shenzhen Expressway. It trades about -0.01 of its potential returns per unit of risk. Shenzhen Expressway is currently generating about -0.17 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

MetLife  vs.  Shenzhen Expressway

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.

Shenzhen Expressway

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Expressway has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with MetLife and Shenzhen Expressway

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

The idea behind MetLife and Shenzhen Expressway 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.