Correlation Between MetLife and Chubb
Can any of the company-specific risk be diversified away by investing in both MetLife and Chubb 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 Chubb into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MetLife and Chubb, you can compare the effects of market volatilities on MetLife and Chubb 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 Chubb. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife and Chubb.
Diversification Opportunities for MetLife and Chubb
Poor diversification
The 3 months correlation between MetLife and Chubb is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb 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 Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of MetLife i.e., MetLife and Chubb go up and down completely randomly.
Pair Corralation between MetLife and Chubb
Considering the 90-day investment horizon MetLife is expected to generate 1.08 times more return on investment than Chubb. However, MetLife is 1.08 times more volatile than Chubb. It trades about -0.06 of its potential returns per unit of risk. Chubb is currently generating about -0.12 per unit of risk. If you would invest 7,310 in MetLife on January 24, 2024 and sell it today you would lose (88.00) from holding MetLife or give up 1.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MetLife vs. Chubb
Performance |
| Timeline |
| MetLife |
| Chubb |
MetLife and Chubb Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MetLife and Chubb
The main advantage of trading using opposite MetLife and Chubb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife position performs unexpectedly, Chubb 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 Chubb will offset losses from the drop in Chubb's long position.The idea behind MetLife and Chubb 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.| Chubb vs. Aquagold International | Chubb vs. Thrivent High Yield | Chubb vs. Morningstar Unconstrained Allocation | Chubb vs. Via Renewables |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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