Correlation Between Metropolitan West and Western Asset
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and Western Asset 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 Western Asset 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 Western Asset E, you can compare the effects of market volatilities on Metropolitan West and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Western Asset.
Diversification Opportunities for Metropolitan West and Western Asset
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Metropolitan and Western is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Total and Western Asset E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset E 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset E has no effect on the direction of Metropolitan West i.e., Metropolitan West and Western Asset go up and down completely randomly.
Pair Corralation between Metropolitan West and Western Asset
Assuming the 90 days horizon Metropolitan West Total is expected to under-perform the Western Asset. But the mutual fund apears to be less risky and, when comparing its historical volatility, Metropolitan West Total is 1.01 times less risky than Western Asset. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Western Asset E is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 940.00 in Western Asset E on August 28, 2024 and sell it today you would lose (22.00) from holding Western Asset E or give up 2.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metropolitan West Total vs. Western Asset E
Performance |
| Timeline |
| Metropolitan West Total |
| Western Asset E |
Metropolitan West and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan West and Western Asset
The main advantage of trading using opposite Metropolitan West and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset'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 |
| Western Asset vs. Clearbridge Aggressive Growth | Western Asset vs. Clearbridge Small Cap | Western Asset vs. Qs International Equity | Western Asset vs. Clearbridge Appreciation 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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