Correlation Between Vestas Wind and MetLife
Can any of the company-specific risk be diversified away by investing in both Vestas Wind 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 Vestas Wind and MetLife into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vestas Wind Systems and MetLife, you can compare the effects of market volatilities on Vestas Wind 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 Vestas Wind with a short position of MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vestas Wind and MetLife.
Diversification Opportunities for Vestas Wind and MetLife
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Vestas and MetLife is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Vestas Wind 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 Vestas Wind Systems 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 Vestas Wind i.e., Vestas Wind and MetLife go up and down completely randomly.
Pair Corralation between Vestas Wind and MetLife
Assuming the 90 days horizon Vestas Wind Systems is expected to under-perform the MetLife. In addition to that, Vestas Wind is 1.75 times more volatile than MetLife. It trades about -0.36 of its total potential returns per unit of risk. MetLife is currently generating about -0.27 per unit of volatility. If you would invest 7,336 in MetLife on January 20, 2024 and sell it today you would lose (341.00) from holding MetLife or give up 4.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vestas Wind Systems vs. MetLife
Performance |
| Timeline |
| Vestas Wind Systems |
| MetLife |
Vestas Wind and MetLife Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vestas Wind and MetLife
The main advantage of trading using opposite Vestas Wind and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestas Wind 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.| Vestas Wind vs. GE Aerospace | Vestas Wind vs. Eaton PLC | Vestas Wind vs. Illinois Tool Works | Vestas Wind vs. Parker Hannifin |
| 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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