Correlation Between MetLife Preferred and Colas SA

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

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

Diversification Opportunities for MetLife Preferred and Colas SA

0.64

Correlation Coefficient

MetLife Preferred  Colas SA

Poor diversification

The 3 months correlation between MetLife and Colas is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding MetLife Preferred Stock and Colas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colas SA and MetLife Preferred 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 MetLife Preferred Stock are associated (or correlated) with Colas SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colas SA has no effect on the direction of MetLife Preferred i.e., MetLife Preferred and Colas SA go up and down completely randomly.

Pair Corralation between MetLife Preferred and Colas SA

Assuming the 90 days trading horizon MetLife Preferred Stock is expected to generate 0.48 times more return on investment than Colas SA. However, MetLife Preferred Stock is 2.09 times less risky than Colas SA. It trades about 0.1 of its potential returns per unit of risk. Colas SA is currently generating about 0.04 per unit of risk. If you would invest  2,056  in MetLife Preferred Stock on January 19, 2024 and sell it today you would earn a total of  322.00  from holding MetLife Preferred Stock or generate 15.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	33.04%
Values	Daily Returns

MetLife Preferred Stock  vs.  Colas SA

MetLife Preferred Stock

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife Preferred Stock are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MetLife Preferred is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Colas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Colas SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Colas SA is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MetLife Preferred and Colas SA

The main advantage of trading using opposite MetLife Preferred and Colas SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife Preferred position performs unexpectedly, Colas SA 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 Colas SA will offset losses from the drop in Colas SA's long position.

The idea behind MetLife Preferred Stock and Colas SA 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.