Correlation Between MetLife and Great-West Lifeco

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

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

Diversification Opportunities for MetLife and Great-West Lifeco

0.64

Correlation Coefficient

MetLife  Great-West Lifeco

Poor diversification

The 3 months correlation between MetLife and Great-West is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Great West Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifeco 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 Great-West Lifeco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Lifeco has no effect on the direction of MetLife i.e., MetLife and Great-West Lifeco go up and down completely randomly.

Pair Corralation between MetLife and Great-West Lifeco

Assuming the 90 days horizon MetLife is expected to generate 1.4 times more return on investment than Great-West Lifeco. However, MetLife is 1.4 times more volatile than Great West Lifeco. It trades about 0.1 of its potential returns per unit of risk. Great West Lifeco is currently generating about 0.06 per unit of risk. If you would invest  6,144  in MetLife on October 22, 2024 and sell it today you would earn a total of  2,200  from holding MetLife or generate 35.81% return on investment over 90 days.

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

MetLife  vs.  Great West Lifeco

MetLife

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MetLife may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Great West Lifeco

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Lifeco are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Great-West Lifeco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MetLife and Great-West Lifeco

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

The idea behind MetLife and Great West Lifeco 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.