Correlation Between Metropolitan West and Investec Emerging
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and Investec Emerging 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 Investec Emerging 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 Investec Emerging Markets, you can compare the effects of market volatilities on Metropolitan West and Investec Emerging 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 Investec Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Investec Emerging.
Diversification Opportunities for Metropolitan West and Investec Emerging
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Metropolitan and Investec is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Total and Investec Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec Emerging Markets 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 Investec Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec Emerging Markets has no effect on the direction of Metropolitan West i.e., Metropolitan West and Investec Emerging go up and down completely randomly.
Pair Corralation between Metropolitan West and Investec Emerging
Assuming the 90 days horizon Metropolitan West is expected to generate 2.15 times less return on investment than Investec Emerging. But when comparing it to its historical volatility, Metropolitan West Total is 1.99 times less risky than Investec Emerging. It trades about 0.04 of its potential returns per unit of risk. Investec Emerging Markets is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 940.00 in Investec Emerging Markets on September 12, 2024 and sell it today you would earn a total of 132.00 from holding Investec Emerging Markets or generate 14.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metropolitan West Total vs. Investec Emerging Markets
Performance |
| Timeline |
| Metropolitan West Total |
| Investec Emerging Markets |
Metropolitan West and Investec Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan West and Investec Emerging
The main advantage of trading using opposite Metropolitan West and Investec Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, Investec Emerging 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 Investec Emerging will offset losses from the drop in Investec Emerging's long position.| Metropolitan West vs. Investec Emerging Markets | Metropolitan West vs. Nasdaq 100 2x Strategy | Metropolitan West vs. Mid Cap 15x Strategy | Metropolitan West vs. Origin Emerging Markets |
| Investec Emerging vs. American Funds New | Investec Emerging vs. SCOR PK | Investec Emerging vs. Morningstar Unconstrained Allocation | Investec Emerging vs. Via Renewables |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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