Correlation Between Swiss Re and MetLife

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

Diversification Opportunities for Swiss Re and MetLife

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Swiss and MetLife is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Re AG and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Swiss Re 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 Swiss Re AG 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 Swiss Re i.e., Swiss Re and MetLife go up and down completely randomly.

Pair Corralation between Swiss Re and MetLife

Assuming the 90 days horizon Swiss Re AG is expected to generate 1.88 times more return on investment than MetLife. However, Swiss Re is 1.88 times more volatile than MetLife. It trades about 0.05 of its potential returns per unit of risk. MetLife is currently generating about 0.03 per unit of risk. If you would invest  7,397  in Swiss Re AG on December 29, 2023 and sell it today you would earn a total of  5,453  from holding Swiss Re AG or generate 73.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Swiss Re AG  vs.  MetLife

 Performance 
       Timeline  
Swiss Re AG 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re AG are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Swiss Re reported solid returns over the last few months and may actually be approaching a breakup point.
MetLife 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, MetLife unveiled solid returns over the last few months and may actually be approaching a breakup point.

Swiss Re and MetLife Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Swiss Re and MetLife

The main advantage of trading using opposite Swiss Re and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swiss Re 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 Swiss Re AG 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.
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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