Correlation Between Vanguard Health and MetLife
Can any of the company-specific risk be diversified away by investing in both Vanguard Health 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 Vanguard Health and MetLife into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Health Care and MetLife, you can compare the effects of market volatilities on Vanguard Health 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 Vanguard Health with a short position of MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and MetLife.
Diversification Opportunities for Vanguard Health and MetLife
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vanguard and MetLife is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Vanguard Health 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 Vanguard Health Care 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 Vanguard Health i.e., Vanguard Health and MetLife go up and down completely randomly.
Pair Corralation between Vanguard Health and MetLife
Assuming the 90 days horizon Vanguard Health is expected to generate 1.21 times less return on investment than MetLife. But when comparing it to its historical volatility, Vanguard Health Care is 1.61 times less risky than MetLife. It trades about 0.03 of its potential returns per unit of risk. MetLife is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 6,277 in MetLife on January 17, 2024 and sell it today you would earn a total of 667.00 from holding MetLife or generate 10.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Vanguard Health Care vs. MetLife
Performance |
| Timeline |
| Vanguard Health Care |
| MetLife |
Vanguard Health and MetLife Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Health and MetLife
The main advantage of trading using opposite Vanguard Health and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health 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.| Vanguard Health vs. Vanguard Dividend Growth | Vanguard Health vs. Vanguard Wellington Fund | Vanguard Health vs. Vanguard Capital Opportunity | Vanguard Health vs. Vanguard Primecap Fund |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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