Correlation Between Metropolitan West and Payden Core
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and Payden Core 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 Payden Core 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 Payden E Bond, you can compare the effects of market volatilities on Metropolitan West and Payden Core 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 Payden Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Payden Core.
Diversification Opportunities for Metropolitan West and Payden Core
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Metropolitan and Payden is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Total and Payden E Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden E Bond 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 Payden Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden E Bond has no effect on the direction of Metropolitan West i.e., Metropolitan West and Payden Core go up and down completely randomly.
Pair Corralation between Metropolitan West and Payden Core
Assuming the 90 days horizon Metropolitan West is expected to generate 3.61 times less return on investment than Payden Core. In addition to that, Metropolitan West is 1.31 times more volatile than Payden E Bond. It trades about 0.02 of its total potential returns per unit of risk. Payden E Bond is currently generating about 0.09 per unit of volatility. If you would invest 905.00 in Payden E Bond on October 23, 2024 and sell it today you would earn a total of 4.00 from holding Payden E Bond or generate 0.44% 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. Payden E Bond
Performance |
| Timeline |
| Metropolitan West Total |
| Payden E Bond |
Metropolitan West and Payden Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan West and Payden Core
The main advantage of trading using opposite Metropolitan West and Payden Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, Payden Core 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 Payden Core will offset losses from the drop in Payden Core's long position.| Metropolitan West vs. Aqr Sustainable Long Short | Metropolitan West vs. Touchstone Ultra Short | Metropolitan West vs. Chartwell Short Duration | Metropolitan West vs. Fidelity Flex Servative |
| Payden Core vs. Western Assets Emerging | Payden Core vs. Franklin Emerging Market | Payden Core vs. Artisan Developing World | Payden Core vs. Angel Oak Multi Strategy |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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