Correlation Between Metropolitan West and Capital World
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and Capital World 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 Metropolitan West and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metropolitan West Porate and Capital World Bond, you can compare the effects of market volatilities on Metropolitan West and Capital World 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 Metropolitan West with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Capital World.
Diversification Opportunities for Metropolitan West and Capital World
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Metropolitan and Capital is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Porate and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond and Metropolitan West 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 Metropolitan West Porate are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Metropolitan West i.e., Metropolitan West and Capital World go up and down completely randomly.
Pair Corralation between Metropolitan West and Capital World
If you would invest 1,536 in Capital World Bond on October 25, 2024 and sell it today you would earn a total of 4.00 from holding Capital World Bond or generate 0.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metropolitan West Porate vs. Capital World Bond
Performance |
| Timeline |
| Metropolitan West Porate |
| Capital World Bond |
Metropolitan West and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan West and Capital World
The main advantage of trading using opposite Metropolitan West and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Metropolitan West vs. Moderate Balanced Allocation | Metropolitan West vs. Calvert Moderate Allocation | Metropolitan West vs. Columbia Moderate Growth |
| Capital World vs. T Rowe Price | Capital World vs. Dodge Cox Stock | Capital World vs. Alternative Asset Allocation | Capital World vs. Rational Strategic Allocation |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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