Correlation Between Metropolitan West and Active Bond
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and Active Bond 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 Active Bond 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 Active Bond Fund, you can compare the effects of market volatilities on Metropolitan West and Active Bond 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 Active Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Active Bond.
Diversification Opportunities for Metropolitan West and Active Bond
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Metropolitan and Active is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Total and Active Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Active Bond Fund 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 Active Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Active Bond Fund has no effect on the direction of Metropolitan West i.e., Metropolitan West and Active Bond go up and down completely randomly.
Pair Corralation between Metropolitan West and Active Bond
Assuming the 90 days horizon Metropolitan West Total is expected to generate 1.16 times more return on investment than Active Bond. However, Metropolitan West is 1.16 times more volatile than Active Bond Fund. It trades about 0.08 of its potential returns per unit of risk. Active Bond Fund is currently generating about 0.09 per unit of risk. If you would invest 877.00 in Metropolitan West Total on August 31, 2024 and sell it today you would earn a total of 35.00 from holding Metropolitan West Total or generate 3.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Metropolitan West Total vs. Active Bond Fund
Performance |
| Timeline |
| Metropolitan West Total |
| Active Bond Fund |
Metropolitan West and Active Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan West and Active Bond
The main advantage of trading using opposite Metropolitan West and Active Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, Active Bond 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 Active Bond will offset losses from the drop in Active Bond's long position.| Metropolitan West vs. Fidelity Managed Retirement | Metropolitan West vs. American Funds Retirement | Metropolitan West vs. Franklin Lifesmart Retirement | Metropolitan West vs. Jp Morgan Smartretirement |
| Active Bond vs. Metropolitan West Total | Active Bond vs. Metropolitan West Total | Active Bond vs. Pimco Total Return | Active Bond vs. Total Return 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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