Correlation Between MetLife and PRUDENTIAL

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

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

Diversification Opportunities for MetLife and PRUDENTIAL

-0.35

Correlation Coefficient

MetLife  PRUDENTIAL

Very good diversification

The 3 months correlation between MetLife and PRUDENTIAL is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and PRUDENTIAL FINL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRUDENTIAL FINL INC 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 PRUDENTIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRUDENTIAL FINL INC has no effect on the direction of MetLife i.e., MetLife and PRUDENTIAL go up and down completely randomly.

Pair Corralation between MetLife and PRUDENTIAL

Considering the 90-day investment horizon MetLife is expected to generate 2.6 times more return on investment than PRUDENTIAL. However, MetLife is 2.6 times more volatile than PRUDENTIAL FINL INC. It trades about 0.06 of its potential returns per unit of risk. PRUDENTIAL FINL INC is currently generating about -0.12 per unit of risk. If you would invest  8,345  in MetLife on September 4, 2024 and sell it today you would earn a total of  343.00  from holding MetLife or generate 4.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

MetLife  vs.  PRUDENTIAL FINL INC

MetLife

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, MetLife unveiled solid returns over the last few months and may actually be approaching a breakup point.

PRUDENTIAL FINL INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PRUDENTIAL FINL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PRUDENTIAL 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 PRUDENTIAL

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

The idea behind MetLife and PRUDENTIAL FINL INC 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.