Correlation Between MetLife and CAPITAL

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

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

Diversification Opportunities for MetLife and CAPITAL

-0.41

Correlation Coefficient

MetLife  CAPITAL

Very good diversification

The 3 months correlation between MetLife and CAPITAL is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and CAPITAL ONE FINL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAPITAL ONE FINL 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 CAPITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAPITAL ONE FINL has no effect on the direction of MetLife i.e., MetLife and CAPITAL go up and down completely randomly.

Pair Corralation between MetLife and CAPITAL

Considering the 90-day investment horizon MetLife is expected to generate 13.09 times more return on investment than CAPITAL. However, MetLife is 13.09 times more volatile than CAPITAL ONE FINL. It trades about 0.11 of its potential returns per unit of risk. CAPITAL ONE FINL is currently generating about -0.02 per unit of risk. If you would invest  7,698  in MetLife on September 4, 2024 and sell it today you would earn a total of  874.00  from holding MetLife or generate 11.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

MetLife  vs.  CAPITAL ONE FINL

MetLife

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, MetLife may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CAPITAL ONE FINL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAPITAL ONE FINL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CAPITAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MetLife and CAPITAL

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

The idea behind MetLife and CAPITAL ONE FINL 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.