Correlation Between Pro Blend and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both Pro Blend 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 Pro Blend and Metropolitan West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pro Blend Moderate Term and Metropolitan West High, you can compare the effects of market volatilities on Pro Blend 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 Pro Blend with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pro Blend and Metropolitan West.
Diversification Opportunities for Pro Blend and Metropolitan West
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pro and Metropolitan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Pro Blend Moderate Term and Metropolitan West High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West High and Pro Blend 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 Pro Blend Moderate Term 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 High has no effect on the direction of Pro Blend i.e., Pro Blend and Metropolitan West go up and down completely randomly.
Pair Corralation between Pro Blend and Metropolitan West
Assuming the 90 days horizon Pro Blend Moderate Term is expected to generate 3.73 times more return on investment than Metropolitan West. However, Pro Blend is 3.73 times more volatile than Metropolitan West High. It trades about 0.21 of its potential returns per unit of risk. Metropolitan West High is currently generating about 0.18 per unit of risk. If you would invest 1,491 in Pro Blend Moderate Term on September 13, 2024 and sell it today you would earn a total of 22.00 from holding Pro Blend Moderate Term or generate 1.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Pro Blend Moderate Term vs. Metropolitan West High
Performance |
| Timeline |
| Pro Blend Moderate |
| Metropolitan West High |
Pro Blend and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pro Blend and Metropolitan West
The main advantage of trading using opposite Pro Blend and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pro Blend 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.| Pro Blend vs. Manning Napier Callodine | Pro Blend vs. Manning Napier Callodine | Pro Blend vs. Manning Napier Callodine | Pro Blend vs. Pro Blend Extended Term |
| Metropolitan West vs. Federated Total Return | Metropolitan West vs. Global Bond Fund | Metropolitan West vs. Government Bond Fund | Metropolitan West vs. Aberdeen Global High |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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