Correlation Between MetLife and Citizens
Can any of the company-specific risk be diversified away by investing in both MetLife and Citizens 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 Citizens into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MetLife and Citizens, you can compare the effects of market volatilities on MetLife and Citizens 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 Citizens. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife and Citizens.
Diversification Opportunities for MetLife and Citizens
Pay attention - limited upside
The 3 months correlation between MetLife and Citizens is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Citizens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens 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 Citizens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens has no effect on the direction of MetLife i.e., MetLife and Citizens go up and down completely randomly.
Pair Corralation between MetLife and Citizens
Considering the 90-day investment horizon MetLife is expected to under-perform the Citizens. But the stock apears to be less risky and, when comparing its historical volatility, MetLife is 2.61 times less risky than Citizens. The stock trades about -0.15 of its potential returns per unit of risk. The Citizens is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 197.00 in Citizens on January 21, 2024 and sell it today you would earn a total of 6.00 from holding Citizens or generate 3.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
MetLife vs. Citizens
Performance |
| Timeline |
| MetLife |
| Citizens |
MetLife and Citizens Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MetLife and Citizens
The main advantage of trading using opposite MetLife and Citizens positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife position performs unexpectedly, Citizens 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 Citizens will offset losses from the drop in Citizens' long position.| MetLife vs. Lincoln National | MetLife vs. Aflac Incorporated | MetLife vs. Unum Group | MetLife vs. Manulife Financial Corp |
| Citizens vs. Vericity | Citizens vs. CNO Financial Group | Citizens vs. National Western Life | Citizens vs. Brighthouse Financial |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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