Correlation Between National Western and MetLife Preferred

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

By analyzing existing cross correlation between National Western Life and MetLife Preferred Stock, you can compare the effects of market volatilities on National Western and MetLife Preferred 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 National Western with a short position of MetLife Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Western and MetLife Preferred.

Diversification Opportunities for National Western and MetLife Preferred

-0.74

Correlation Coefficient

National Western  MetLife Preferred

Pay attention - limited upside

The 3 months correlation between National and MetLife is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding National Western Life and MetLife Preferred Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife Preferred Stock and National Western 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 National Western Life are associated (or correlated) with MetLife Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetLife Preferred Stock has no effect on the direction of National Western i.e., National Western and MetLife Preferred go up and down completely randomly.

Pair Corralation between National Western and MetLife Preferred

If you would invest  49,998  in National Western Life on September 12, 2024 and sell it today you would earn a total of  0.00  from holding National Western Life or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

National Western Life  vs.  MetLife Preferred Stock

National Western Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Western Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, National Western is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

MetLife Preferred Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MetLife Preferred Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MetLife Preferred is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National Western and MetLife Preferred

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

The idea behind National Western Life and MetLife Preferred Stock 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.