Correlation Between Metropolitan West and Prudential High
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and Prudential High 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 Prudential High 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 Prudential High Yield, you can compare the effects of market volatilities on Metropolitan West and Prudential High 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 Prudential High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Prudential High.
Diversification Opportunities for Metropolitan West and Prudential High
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Metropolitan and Prudential is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West High and Prudential High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential High Yield 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 Prudential High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential High Yield has no effect on the direction of Metropolitan West i.e., Metropolitan West and Prudential High go up and down completely randomly.
Pair Corralation between Metropolitan West and Prudential High
Assuming the 90 days horizon Metropolitan West is expected to generate 1.15 times less return on investment than Prudential High. But when comparing it to its historical volatility, Metropolitan West High is 1.13 times less risky than Prudential High. It trades about 0.12 of its potential returns per unit of risk. Prudential High Yield is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 403.00 in Prudential High Yield on August 28, 2024 and sell it today you would earn a total of 80.00 from holding Prudential High Yield or generate 19.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metropolitan West High vs. Prudential High Yield
Performance |
| Timeline |
| Metropolitan West High |
| Prudential High Yield |
Metropolitan West and Prudential High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan West and Prudential High
The main advantage of trading using opposite Metropolitan West and Prudential High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, Prudential High 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 Prudential High will offset losses from the drop in Prudential High'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 |
| Prudential High vs. Prudential Total Return | Prudential High vs. Metropolitan West Total | Prudential High vs. John Hancock Disciplined | Prudential High vs. Europacific Growth Fund |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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