Correlation Between MetLife and American Financial
Can any of the company-specific risk be diversified away by investing in both MetLife and American Financial 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 American Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MetLife and American Financial Group, you can compare the effects of market volatilities on MetLife and American Financial 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 American Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife and American Financial.
Diversification Opportunities for MetLife and American Financial
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MetLife and American is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and American Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Financial 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 American Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Financial has no effect on the direction of MetLife i.e., MetLife and American Financial go up and down completely randomly.
Pair Corralation between MetLife and American Financial
Considering the 90-day investment horizon MetLife is expected to generate 1.08 times more return on investment than American Financial. However, MetLife is 1.08 times more volatile than American Financial Group. It trades about 0.03 of its potential returns per unit of risk. American Financial Group is currently generating about 0.01 per unit of risk. If you would invest 6,337 in MetLife on January 26, 2024 and sell it today you would earn a total of 935.00 from holding MetLife or generate 14.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MetLife vs. American Financial Group
Performance |
| Timeline |
| MetLife |
| American Financial |
MetLife and American Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MetLife and American Financial
The main advantage of trading using opposite MetLife and American Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife position performs unexpectedly, American Financial 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 American Financial will offset losses from the drop in American Financial's long position.| MetLife vs. Lincoln National | MetLife vs. Aflac Incorporated | MetLife vs. Unum Group | MetLife vs. Manulife Financial Corp |
| American Financial vs. Selective Insurance Group | American Financial vs. Horace Mann Educators | American Financial vs. Kemper | American Financial vs. ProAssurance |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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