Correlation Between MetLife and Alleghany

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

Diversification Opportunities for MetLife and Alleghany

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between MetLife and Alleghany is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Alleghany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alleghany 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 Alleghany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alleghany has no effect on the direction of MetLife i.e., MetLife and Alleghany go up and down completely randomly.

Pair Corralation between MetLife and Alleghany

If you would invest  6,934  in MetLife on December 30, 2023 and sell it today you would earn a total of  477.00  from holding MetLife or generate 6.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy4.55%
ValuesDaily Returns

MetLife  vs.  Alleghany

 Performance 
       Timeline  
MetLife 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, MetLife may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Alleghany 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Alleghany has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Alleghany is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

MetLife and Alleghany Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MetLife and Alleghany

The main advantage of trading using opposite MetLife and Alleghany positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife position performs unexpectedly, Alleghany 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 Alleghany will offset losses from the drop in Alleghany's long position.
The idea behind MetLife and Alleghany 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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