Correlation Between Metropolitan West and Strategic Enhanced
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and Strategic Enhanced 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 Strategic Enhanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metropolitan West Total and Strategic Enhanced Yield, you can compare the effects of market volatilities on Metropolitan West and Strategic Enhanced 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 Strategic Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Strategic Enhanced.
Diversification Opportunities for Metropolitan West and Strategic Enhanced
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Metropolitan and Strategic is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Total and Strategic Enhanced Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Enhanced 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 Total are associated (or correlated) with Strategic Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Enhanced Yield has no effect on the direction of Metropolitan West i.e., Metropolitan West and Strategic Enhanced go up and down completely randomly.
Pair Corralation between Metropolitan West and Strategic Enhanced
Assuming the 90 days horizon Metropolitan West Total is expected to under-perform the Strategic Enhanced. In addition to that, Metropolitan West is 1.12 times more volatile than Strategic Enhanced Yield. It trades about -0.06 of its total potential returns per unit of risk. Strategic Enhanced Yield is currently generating about 0.09 per unit of volatility. If you would invest 867.00 in Strategic Enhanced Yield on August 28, 2024 and sell it today you would earn a total of 5.00 from holding Strategic Enhanced Yield or generate 0.58% 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 Total vs. Strategic Enhanced Yield
Performance |
| Timeline |
| Metropolitan West Total |
| Strategic Enhanced Yield |
Metropolitan West and Strategic Enhanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan West and Strategic Enhanced
The main advantage of trading using opposite Metropolitan West and Strategic Enhanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, Strategic Enhanced 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 Strategic Enhanced will offset losses from the drop in Strategic Enhanced's long position.| Metropolitan West vs. Calvert Conservative Allocation | Metropolitan West vs. American Funds Conservative | Metropolitan West vs. Jhancock Diversified Macro | Metropolitan West vs. Western Asset Diversified |
| Strategic Enhanced vs. Bond Fund Investor | Strategic Enhanced vs. Cavanal Hill Hedged | Strategic Enhanced vs. Limited Duration Fund | Strategic Enhanced vs. Cavanal Hill Ultra |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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