Correlation Between Electra and MetLife
Can any of the company-specific risk be diversified away by investing in both Electra 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 Electra and MetLife into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electra and MetLife, you can compare the effects of market volatilities on Electra 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 Electra with a short position of MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electra and MetLife.
Diversification Opportunities for Electra and MetLife
Poor diversification
The 3 months correlation between Electra and MetLife is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Electra and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Electra 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 Electra 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 Electra i.e., Electra and MetLife go up and down completely randomly.
Pair Corralation between Electra and MetLife
Assuming the 90 days trading horizon Electra is expected to under-perform the MetLife. In addition to that, Electra is 2.63 times more volatile than MetLife. It trades about -0.31 of its total potential returns per unit of risk. MetLife is currently generating about -0.27 per unit of volatility. If you would invest 7,336 in MetLife on January 20, 2024 and sell it today you would lose (341.00) from holding MetLife or give up 4.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Electra vs. MetLife
Performance |
| Timeline |
| Electra |
| MetLife |
Electra and MetLife Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electra and MetLife
The main advantage of trading using opposite Electra and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electra 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.| Electra vs. EN Shoham Business | Electra vs. Accel Solutions Group | Electra vs. Mivtach Shamir | Electra vs. Rani Zim Shopping |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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