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 Investment, 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
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between World and Metropolitan is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Metropolitan West Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West 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 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 4.55 times more return on investment than Metropolitan West. However, World Energy is 4.55 times more volatile than Metropolitan West Investment. It trades about 0.27 of its potential returns per unit of risk. Metropolitan West Investment is currently generating about 0.06 per unit of risk. If you would invest 1,423 in World Energy Fund on August 31, 2024 and sell it today you would earn a total of 109.00 from holding World Energy Fund or generate 7.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. Metropolitan West Investment
Performance |
| Timeline |
| World Energy |
| Metropolitan West |
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. Columbia Vertible Securities | World Energy vs. Advent Claymore Convertible | World Energy vs. Absolute Convertible Arbitrage | World Energy vs. Calamos Dynamic Convertible |
| Metropolitan West vs. World Energy Fund | Metropolitan West vs. Jennison Natural Resources | Metropolitan West vs. Oil Gas Ultrasector | Metropolitan West vs. Dreyfus Natural Resources |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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