Correlation Between Metropolitan West and California Municipal
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and California Municipal 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 California Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metropolitan West High and California Municipal Portfolio, you can compare the effects of market volatilities on Metropolitan West and California Municipal 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 California Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and California Municipal.
Diversification Opportunities for Metropolitan West and California Municipal
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Metropolitan and California is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West High and California Municipal Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Municipal 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 High are associated (or correlated) with California Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Municipal has no effect on the direction of Metropolitan West i.e., Metropolitan West and California Municipal go up and down completely randomly.
Pair Corralation between Metropolitan West and California Municipal
Assuming the 90 days horizon Metropolitan West High is expected to generate 0.66 times more return on investment than California Municipal. However, Metropolitan West High is 1.52 times less risky than California Municipal. It trades about 0.16 of its potential returns per unit of risk. California Municipal Portfolio is currently generating about 0.07 per unit of risk. If you would invest 930.00 in Metropolitan West High on August 28, 2024 and sell it today you would earn a total of 4.00 from holding Metropolitan West High or generate 0.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metropolitan West High vs. California Municipal Portfolio
Performance |
| Timeline |
| Metropolitan West High |
| California Municipal |
Metropolitan West and California Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan West and California Municipal
The main advantage of trading using opposite Metropolitan West and California Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, California Municipal 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 California Municipal will offset losses from the drop in California Municipal's long position.| Metropolitan West vs. Federated Total Return | Metropolitan West vs. Global Bond Fund | Metropolitan West vs. Government Bond Fund | Metropolitan West vs. Aberdeen Global High |
| California Municipal vs. Ab Global E | California Municipal vs. Ab Global E | California Municipal vs. Ab Global E | California Municipal vs. Ab Minnesota Portfolio |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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