Correlation Between Government Bond and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both Government Bond and Metropolitan West 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 Government Bond and Metropolitan West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Government Bond Fund and Metropolitan West Total, you can compare the effects of market volatilities on Government Bond and Metropolitan West 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 Government Bond with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Government Bond and Metropolitan West.
Diversification Opportunities for Government Bond and Metropolitan West
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Government and Metropolitan is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Government Bond Fund and Metropolitan West Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West Total and Government Bond 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 Government Bond Fund are associated (or correlated) with Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West Total has no effect on the direction of Government Bond i.e., Government Bond and Metropolitan West go up and down completely randomly.
Pair Corralation between Government Bond and Metropolitan West
Assuming the 90 days horizon Government Bond Fund is expected to under-perform the Metropolitan West. But the mutual fund apears to be less risky and, when comparing its historical volatility, Government Bond Fund is 1.06 times less risky than Metropolitan West. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Metropolitan West Total is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 917.00 in Metropolitan West Total on August 29, 2024 and sell it today you would lose (10.00) from holding Metropolitan West Total or give up 1.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Government Bond Fund vs. Metropolitan West Total
Performance |
| Timeline |
| Government Bond |
| Metropolitan West Total |
Government Bond and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Government Bond and Metropolitan West
The main advantage of trading using opposite Government Bond and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Government Bond position performs unexpectedly, Metropolitan West 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 Metropolitan West will offset losses from the drop in Metropolitan West's long position.| Government Bond vs. Versatile Bond Portfolio | Government Bond vs. Ambrus Core Bond | Government Bond vs. Ms Global Fixed | Government Bond vs. Blrc Sgy Mnp |
| Metropolitan West vs. Europacific Growth Fund | Metropolitan West vs. Templeton Global Bond | Metropolitan West vs. Mfs Value Fund | Metropolitan West vs. Mfs Emerging Markets |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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