Correlation Between Disney and MetLife
Can any of the company-specific risk be diversified away by investing in both Disney 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 Disney and MetLife into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and MetLife, you can compare the effects of market volatilities on Disney 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 Disney with a short position of MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and MetLife.
Diversification Opportunities for Disney and MetLife
Poor diversification
The 3 months correlation between Disney and MetLife is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Disney 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 Walt Disney 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 Disney i.e., Disney and MetLife go up and down completely randomly.
Pair Corralation between Disney and MetLife
Considering the 90-day investment horizon Walt Disney is expected to under-perform the MetLife. In addition to that, Disney is 1.3 times more volatile than MetLife. It trades about -0.17 of its total potential returns per unit of risk. MetLife is currently generating about -0.03 per unit of volatility. If you would invest 7,310 in MetLife on January 25, 2024 and sell it today you would lose (57.00) from holding MetLife or give up 0.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walt Disney vs. MetLife
Performance |
| Timeline |
| Walt Disney |
| MetLife |
Disney and MetLife Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and MetLife
The main advantage of trading using opposite Disney and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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.| Disney vs. Roku Inc | Disney vs. Paramount Global Class | Disney vs. Warner Bros Discovery | Disney vs. Paramount Global Class |
| MetLife vs. Lincoln National | MetLife vs. Aflac Incorporated | MetLife vs. Unum Group | MetLife vs. Manulife Financial Corp |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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