Correlation Between World Energy and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both World Energy 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 World Energy and Metropolitan West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and Metropolitan West Porate, you can compare the effects of market volatilities on World Energy 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 World Energy with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Metropolitan West.
Diversification Opportunities for World Energy and Metropolitan West
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between World and Metropolitan is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Metropolitan West Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West Porate and World Energy 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 World Energy 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 Porate has no effect on the direction of World Energy i.e., World Energy and Metropolitan West go up and down completely randomly.
Pair Corralation between World Energy and Metropolitan West
Assuming the 90 days horizon World Energy Fund is expected to generate 2.86 times more return on investment than Metropolitan West. However, World Energy is 2.86 times more volatile than Metropolitan West Porate. It trades about 0.03 of its potential returns per unit of risk. Metropolitan West Porate is currently generating about 0.04 per unit of risk. If you would invest 1,280 in World Energy Fund on October 14, 2024 and sell it today you would earn a total of 229.00 from holding World Energy Fund or generate 17.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. Metropolitan West Porate
Performance |
| Timeline |
| World Energy |
| Metropolitan West Porate |
World Energy and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and Metropolitan West
The main advantage of trading using opposite World Energy and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy 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.| World Energy vs. Inverse Government Long | World Energy vs. Hsbc Government Money | World Energy vs. Dreyfus Government Cash | World Energy vs. Ridgeworth Seix Government |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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