Correlation Between PCB Tec and MetLife
Can any of the company-specific risk be diversified away by investing in both PCB Tec 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 PCB Tec and MetLife into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PCB Tec and MetLife, you can compare the effects of market volatilities on PCB Tec 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 PCB Tec with a short position of MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of PCB Tec and MetLife.
Diversification Opportunities for PCB Tec and MetLife
Significant diversification
The 3 months correlation between PCB and MetLife is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding PCB Tec and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and PCB Tec 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 PCB Tec 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 PCB Tec i.e., PCB Tec and MetLife go up and down completely randomly.
Pair Corralation between PCB Tec and MetLife
Assuming the 90 days trading horizon PCB Tec is expected to generate 2.21 times more return on investment than MetLife. However, PCB Tec is 2.21 times more volatile than MetLife. It trades about 0.1 of its potential returns per unit of risk. MetLife is currently generating about -0.06 per unit of risk. If you would invest 35,600 in PCB Tec on January 25, 2024 and sell it today you would earn a total of 1,210 from holding PCB Tec or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 80.95% |
| Values | Daily Returns |
PCB Tec vs. MetLife
Performance |
| Timeline |
| PCB Tec |
| MetLife |
PCB Tec and MetLife Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PCB Tec and MetLife
The main advantage of trading using opposite PCB Tec and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PCB Tec 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.The idea behind PCB Tec and MetLife 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.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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |