Correlation Between Aflac Incorporated and MetLife

Can any of the company-specific risk be diversified away by investing in both Aflac Incorporated 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 Aflac Incorporated and MetLife into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aflac Incorporated and MetLife, you can compare the effects of market volatilities on Aflac Incorporated 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 Aflac Incorporated with a short position of MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aflac Incorporated and MetLife.

Diversification Opportunities for Aflac Incorporated and MetLife

0.84

Correlation Coefficient

Aflac Incorporated  MetLife

Very poor diversification

The 3 months correlation between Aflac and MetLife is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Aflac Incorporated and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and Aflac Incorporated 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 Aflac Incorporated 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 Aflac Incorporated i.e., Aflac Incorporated and MetLife go up and down completely randomly.

Pair Corralation between Aflac Incorporated and MetLife

Considering the 90-day investment horizon Aflac Incorporated is expected to under-perform the MetLife. In addition to that, Aflac Incorporated is 1.36 times more volatile than MetLife. It trades about -0.02 of its total potential returns per unit of risk. MetLife is currently generating about -0.02 per unit of volatility. If you would invest  7,306  in MetLife on January 26, 2024 and sell it today you would lose (34.00) from holding MetLife or give up 0.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Aflac Incorporated  vs.  MetLife

Aflac Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aflac Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Aflac Incorporated is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

MetLife

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, MetLife is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aflac Incorporated and MetLife

The main advantage of trading using opposite Aflac Incorporated and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aflac Incorporated 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 Aflac Incorporated 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.