Correlation Between Metropolitan West and Investment Grade
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and Investment Grade 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 Investment Grade 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 Investment Grade Porate, you can compare the effects of market volatilities on Metropolitan West and Investment Grade 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 Investment Grade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Investment Grade.
Diversification Opportunities for Metropolitan West and Investment Grade
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Metropolitan and Investment is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West High and Investment Grade Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Grade Porate 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 Investment Grade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Grade Porate has no effect on the direction of Metropolitan West i.e., Metropolitan West and Investment Grade go up and down completely randomly.
Pair Corralation between Metropolitan West and Investment Grade
Assuming the 90 days horizon Metropolitan West is expected to generate 1.33 times less return on investment than Investment Grade. But when comparing it to its historical volatility, Metropolitan West High is 3.08 times less risky than Investment Grade. It trades about 0.16 of its potential returns per unit of risk. Investment Grade Porate is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 899.00 in Investment Grade Porate on August 27, 2024 and sell it today you would earn a total of 5.00 from holding Investment Grade Porate or generate 0.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metropolitan West High vs. Investment Grade Porate
Performance |
| Timeline |
| Metropolitan West High |
| Investment Grade Porate |
Metropolitan West and Investment Grade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan West and Investment Grade
The main advantage of trading using opposite Metropolitan West and Investment Grade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, Investment Grade 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 Investment Grade will offset losses from the drop in Investment Grade'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 |
| Investment Grade vs. Transamerica Emerging Markets | Investment Grade vs. Nasdaq 100 2x Strategy | Investment Grade vs. Siit Emerging Markets | Investment Grade vs. Investec Emerging Markets |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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