Correlation Between Metropolitan West and Regional Bank
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and Regional Bank 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 Regional Bank 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 Regional Bank Fund, you can compare the effects of market volatilities on Metropolitan West and Regional Bank 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 Regional Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Regional Bank.
Diversification Opportunities for Metropolitan West and Regional Bank
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Metropolitan and Regional is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Porate and Regional Bank Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Bank 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 Regional Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Bank has no effect on the direction of Metropolitan West i.e., Metropolitan West and Regional Bank go up and down completely randomly.
Pair Corralation between Metropolitan West and Regional Bank
Assuming the 90 days horizon Metropolitan West Porate is expected to under-perform the Regional Bank. But the mutual fund apears to be less risky and, when comparing its historical volatility, Metropolitan West Porate is 11.16 times less risky than Regional Bank. The mutual fund trades about -0.19 of its potential returns per unit of risk. The Regional Bank Fund is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,832 in Regional Bank Fund on August 28, 2024 and sell it today you would earn a total of 556.00 from holding Regional Bank Fund or generate 19.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metropolitan West Porate vs. Regional Bank Fund
Performance |
| Timeline |
| Metropolitan West Porate |
| Regional Bank |
Metropolitan West and Regional Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan West and Regional Bank
The main advantage of trading using opposite Metropolitan West and Regional Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, Regional Bank 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 Regional Bank will offset losses from the drop in Regional Bank's long position.| Metropolitan West vs. Metropolitan West Alpha | Metropolitan West vs. Metropolitan West Unconstrained | Metropolitan West vs. Metropolitan West Unconstrained | Metropolitan West vs. Metropolitan West Flexible |
| Regional Bank vs. California Bond Fund | Regional Bank vs. Ishares Municipal Bond | Regional Bank vs. Bbh Intermediate Municipal | Regional Bank vs. Franklin High Yield |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |