Correlation Between BBVA Banco and MetLife

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Can any of the company-specific risk be diversified away by investing in both BBVA Banco 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 BBVA Banco and MetLife into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBVA Banco Frances and MetLife, you can compare the effects of market volatilities on BBVA Banco 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 BBVA Banco with a short position of MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBVA Banco and MetLife.

Diversification Opportunities for BBVA Banco and MetLife

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between BBVA and MetLife is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding BBVA Banco Frances and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and BBVA Banco 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 BBVA Banco Frances 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 BBVA Banco i.e., BBVA Banco and MetLife go up and down completely randomly.

Pair Corralation between BBVA Banco and MetLife

Assuming the 90 days trading horizon BBVA Banco Frances is expected to generate 21.88 times more return on investment than MetLife. However, BBVA Banco is 21.88 times more volatile than MetLife. It trades about 0.07 of its potential returns per unit of risk. MetLife is currently generating about 0.02 per unit of risk. If you would invest  19,113  in BBVA Banco Frances on December 30, 2023 and sell it today you would earn a total of  287,752  from holding BBVA Banco Frances or generate 1505.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy97.57%
ValuesDaily Returns

BBVA Banco Frances  vs.  MetLife

 Performance 
       Timeline  
BBVA Banco Frances 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in BBVA Banco Frances are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BBVA Banco sustained solid returns over the last few months and may actually be approaching a breakup point.
MetLife 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, MetLife may actually be approaching a critical reversion point that can send shares even higher in April 2024.

BBVA Banco and MetLife Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BBVA Banco and MetLife

The main advantage of trading using opposite BBVA Banco and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBVA Banco 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 BBVA Banco Frances 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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