Correlation Between Metropolitan West and American Funds
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and American Funds 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 American Funds 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 American Funds Income, you can compare the effects of market volatilities on Metropolitan West and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and American Funds.
Diversification Opportunities for Metropolitan West and American Funds
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Metropolitan and American is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West High and American Funds Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Income 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Income has no effect on the direction of Metropolitan West i.e., Metropolitan West and American Funds go up and down completely randomly.
Pair Corralation between Metropolitan West and American Funds
Assuming the 90 days horizon Metropolitan West is expected to generate 1.44 times less return on investment than American Funds. But when comparing it to its historical volatility, Metropolitan West High is 1.63 times less risky than American Funds. It trades about 0.19 of its potential returns per unit of risk. American Funds Income is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,170 in American Funds Income on September 14, 2024 and sell it today you would earn a total of 196.00 from holding American Funds Income or generate 16.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Metropolitan West High vs. American Funds Income
Performance |
| Timeline |
| Metropolitan West High |
| American Funds Income |
Metropolitan West and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan West and American Funds
The main advantage of trading using opposite Metropolitan West and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' 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 |
| American Funds vs. Nuveen Municipal High | American Funds vs. Metropolitan West High | American Funds vs. Alliancebernstein Global High | American Funds vs. Western Asset High |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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