Correlation Between Metropolitan West and International Fund
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and International Fund 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 International Fund 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 International Fund International, you can compare the effects of market volatilities on Metropolitan West and International Fund 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 International Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and International Fund.
Diversification Opportunities for Metropolitan West and International Fund
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Metropolitan and International is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Total and International Fund Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International 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 International Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Fund has no effect on the direction of Metropolitan West i.e., Metropolitan West and International Fund go up and down completely randomly.
Pair Corralation between Metropolitan West and International Fund
Assuming the 90 days horizon Metropolitan West Total is expected to under-perform the International Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Metropolitan West Total is 1.66 times less risky than International Fund. The mutual fund trades about -0.17 of its potential returns per unit of risk. The International Fund International is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 3,725 in International Fund International on August 29, 2024 and sell it today you would lose (15.00) from holding International Fund International or give up 0.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Metropolitan West Total vs. International Fund Internation
Performance |
| Timeline |
| Metropolitan West Total |
| International Fund |
Metropolitan West and International Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan West and International Fund
The main advantage of trading using opposite Metropolitan West and International Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, International Fund 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 International Fund will offset losses from the drop in International Fund's long position.| Metropolitan West vs. Loomis Sayles Bond | Metropolitan West vs. Doubleline Total Return | Metropolitan West vs. Baird E Plus | Metropolitan West vs. Harbor International Fund |
| International Fund vs. Large Cap Growth | International Fund vs. Parnassus Mid Cap | International Fund vs. Parnassus E Equity | International Fund vs. Doubleline Total Return |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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