Correlation Between Associated British and MetLife
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and MetLife into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and MetLife, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and MetLife.
Diversification Opportunities for Associated British and MetLife
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Associated and MetLife is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and MetLife go up and down completely randomly.
Pair Corralation between Associated British and MetLife
Assuming the 90 days horizon Associated British Foods is expected to generate 1.51 times more return on investment than MetLife. However, Associated British is 1.51 times more volatile than MetLife. It trades about 0.1 of its potential returns per unit of risk. MetLife is currently generating about 0.14 per unit of risk. If you would invest 2,788 in Associated British Foods on February 6, 2024 and sell it today you would earn a total of 572.00 from holding Associated British Foods or generate 20.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. MetLife
Performance |
| Timeline |
| Associated British Foods |
| MetLife |
Associated British and MetLife Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and MetLife
The main advantage of trading using opposite Associated British and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.| Associated British vs. Bank Mandiri Persero | Associated British vs. Astra International Tbk | Associated British vs. United Tractors Tbk |
| MetLife vs. Lincoln National | MetLife vs. Aflac Incorporated | MetLife vs. Unum Group | MetLife vs. Manulife Financial Corp |
Check out your portfolio center.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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