Correlation Between MetLife and CORNERSTONE

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

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

Diversification Opportunities for MetLife and CORNERSTONE

0.26

Correlation Coefficient

MetLife  CORNERSTONE

Modest diversification

The 3 months correlation between MetLife and CORNERSTONE is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and CORNERSTONE BLDG BRANDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CORNERSTONE BLDG BRANDS 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 CORNERSTONE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CORNERSTONE BLDG BRANDS has no effect on the direction of MetLife i.e., MetLife and CORNERSTONE go up and down completely randomly.

Pair Corralation between MetLife and CORNERSTONE

Considering the 90-day investment horizon MetLife is expected to generate 0.82 times more return on investment than CORNERSTONE. However, MetLife is 1.21 times less risky than CORNERSTONE. It trades about 0.0 of its potential returns per unit of risk. CORNERSTONE BLDG BRANDS is currently generating about -0.03 per unit of risk. If you would invest  8,632  in MetLife on December 2, 2024 and sell it today you would lose (14.00) from holding MetLife or give up 0.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.16%
Values	Daily Returns

MetLife  vs.  CORNERSTONE BLDG BRANDS

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.

CORNERSTONE BLDG BRANDS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with MetLife and CORNERSTONE

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

The idea behind MetLife and CORNERSTONE BLDG BRANDS 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.