Correlation Between Best Buy and MetLife

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

Diversification Opportunities for Best Buy and MetLife

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Best and MetLife is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Best Buy Co and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Best Buy 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 Best Buy Co 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 Best Buy i.e., Best Buy and MetLife go up and down completely randomly.

Pair Corralation between Best Buy and MetLife

Considering the 90-day investment horizon Best Buy is expected to generate 1.34 times less return on investment than MetLife. In addition to that, Best Buy is 2.59 times more volatile than MetLife. It trades about 0.13 of its total potential returns per unit of risk. MetLife is currently generating about 0.46 per unit of volatility. If you would invest  6,916  in MetLife on December 29, 2023 and sell it today you would earn a total of  495.00  from holding MetLife or generate 7.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Best Buy Co  vs.  MetLife

 Performance 
       Timeline  
Best Buy 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Best Buy may actually be approaching a critical reversion point that can send shares even higher in April 2024.
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 inconsistent technical and fundamental indicators, MetLife unveiled solid returns over the last few months and may actually be approaching a breakup point.

Best Buy and MetLife Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Best Buy and MetLife

The main advantage of trading using opposite Best Buy and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Best Buy 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 Best Buy Co 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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