Correlation Between MetLife and Best Buy

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

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

Diversification Opportunities for MetLife and Best Buy

0.65

Correlation Coefficient

MetLife  Best Buy

Poor diversification

The 3 months correlation between MetLife and Best is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and MetLife 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 MetLife are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of MetLife i.e., MetLife and Best Buy go up and down completely randomly.

Pair Corralation between MetLife and Best Buy

Considering the 90-day investment horizon MetLife is expected to generate 0.75 times more return on investment than Best Buy. However, MetLife is 1.33 times less risky than Best Buy. It trades about -0.13 of its potential returns per unit of risk. Best Buy Co is currently generating about -0.16 per unit of risk. If you would invest  7,313  in MetLife on February 4, 2024 and sell it today you would lose (261.00) from holding MetLife or give up 3.57% of portfolio value over 90 days.

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

MetLife  vs.  Best Buy Co

MetLife

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, MetLife may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Best Buy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Best Buy is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MetLife and Best Buy

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

The idea behind MetLife and Best Buy Co 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.