Correlation Between Metropolitan West and Pimco Total
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and Pimco Total 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 Pimco Total 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 Pimco Total Return, you can compare the effects of market volatilities on Metropolitan West and Pimco Total 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 Pimco Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Pimco Total.
Diversification Opportunities for Metropolitan West and Pimco Total
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Metropolitan and Pimco is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Total and Pimco Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Total Return 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 Pimco Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Total Return has no effect on the direction of Metropolitan West i.e., Metropolitan West and Pimco Total go up and down completely randomly.
Pair Corralation between Metropolitan West and Pimco Total
Assuming the 90 days horizon Metropolitan West is expected to generate 2.06 times less return on investment than Pimco Total. In addition to that, Metropolitan West is 1.16 times more volatile than Pimco Total Return. It trades about 0.05 of its total potential returns per unit of risk. Pimco Total Return is currently generating about 0.13 per unit of volatility. If you would invest 857.00 in Pimco Total Return on September 1, 2024 and sell it today you would earn a total of 9.00 from holding Pimco Total Return or generate 1.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Metropolitan West Total vs. Pimco Total Return
Performance |
| Timeline |
| Metropolitan West Total |
| Pimco Total Return |
Metropolitan West and Pimco Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan West and Pimco Total
The main advantage of trading using opposite Metropolitan West and Pimco Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, Pimco Total 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 Pimco Total will offset losses from the drop in Pimco Total's long position.| Metropolitan West vs. Strategic Allocation Aggressive | Metropolitan West vs. Franklin High Income | Metropolitan West vs. Lgm Risk Managed | Metropolitan West vs. Federated Institutional High |
| Pimco Total vs. Pimco Rae Worldwide | Pimco Total vs. Pimco Rae Worldwide | Pimco Total vs. Pimco Rae Worldwide | Pimco Total vs. Pimco Rae Worldwide |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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