Correlation Between Exxon and MetLife

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

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

Diversification Opportunities for Exxon and MetLife

0.57

Correlation Coefficient

Exxon  MetLife

Very weak diversification

The 3 months correlation between Exxon and MetLife is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Exxon 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 Exxon Mobil Corp are associated (or correlated) with MetLife. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetLife has no effect on the direction of Exxon i.e., Exxon and MetLife go up and down completely randomly.

Pair Corralation between Exxon and MetLife

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 1.16 times more return on investment than MetLife. However, Exxon is 1.16 times more volatile than MetLife. It trades about 0.19 of its potential returns per unit of risk. MetLife is currently generating about 0.02 per unit of risk. If you would invest  10,588  in Exxon Mobil Corp on December 2, 2024 and sell it today you would earn a total of  545.00  from holding Exxon Mobil Corp or generate 5.15% return on investment over 90 days.

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

Exxon Mobil Corp  vs.  MetLife

Exxon Mobil Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exxon Mobil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Exxon and MetLife

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

The idea behind Exxon Mobil Corp and MetLife 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.