Correlation Between Prime Securities and MetLife

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

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

Diversification Opportunities for Prime Securities and MetLife

0.04

Correlation Coefficient

Prime Securities  MetLife

Significant diversification

The 3 months correlation between Prime and MetLife is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Prime Securities Limited and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Prime Securities 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 Prime Securities Limited 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 Prime Securities i.e., Prime Securities and MetLife go up and down completely randomly.

Pair Corralation between Prime Securities and MetLife

Assuming the 90 days trading horizon Prime Securities Limited is expected to generate 1.49 times more return on investment than MetLife. However, Prime Securities is 1.49 times more volatile than MetLife. It trades about -0.03 of its potential returns per unit of risk. MetLife is currently generating about -0.17 per unit of risk. If you would invest  17,935  in Prime Securities Limited on February 7, 2024 and sell it today you would lose (255.00) from holding Prime Securities Limited or give up 1.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Prime Securities Limited  vs.  MetLife

Prime Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prime Securities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Prime Securities is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

MetLife

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, MetLife is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Prime Securities and MetLife

The main advantage of trading using opposite Prime Securities and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Securities 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 Prime Securities Limited 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.