Correlation Between MetLife and Apple

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

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

Diversification Opportunities for MetLife and Apple

-0.78

Correlation Coefficient

MetLife  Apple

Pay attention - limited upside

The 3 months correlation between MetLife and Apple is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and MetLife 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 are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of MetLife i.e., MetLife and Apple go up and down completely randomly.

Pair Corralation between MetLife and Apple

Considering the 90-day investment horizon MetLife is expected to under-perform the Apple. But the stock apears to be less risky and, when comparing its historical volatility, MetLife is 1.64 times less risky than Apple. The stock trades about -0.17 of its potential returns per unit of risk. The Apple Inc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  16,845  in Apple Inc on February 6, 2024 and sell it today you would earn a total of  1,491  from holding Apple Inc or generate 8.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

MetLife  vs.  Apple Inc

MetLife

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, MetLife may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Apple Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with MetLife and Apple

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

The idea behind MetLife and Apple Inc 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.