Correlation Between NYSE Composite and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Metropolitan West 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 NYSE Composite and Metropolitan West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Metropolitan West High, you can compare the effects of market volatilities on NYSE Composite and Metropolitan West 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 NYSE Composite with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Metropolitan West.
Diversification Opportunities for NYSE Composite and Metropolitan West
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NYSE and Metropolitan is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Metropolitan West High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West High and NYSE Composite 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 NYSE Composite are associated (or correlated) with Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West High has no effect on the direction of NYSE Composite i.e., NYSE Composite and Metropolitan West go up and down completely randomly.
Pair Corralation between NYSE Composite and Metropolitan West
Assuming the 90 days trading horizon NYSE Composite is expected to generate 3.88 times more return on investment than Metropolitan West. However, NYSE Composite is 3.88 times more volatile than Metropolitan West High. It trades about 0.14 of its potential returns per unit of risk. Metropolitan West High is currently generating about 0.19 per unit of risk. If you would invest 1,804,550 in NYSE Composite on September 3, 2024 and sell it today you would earn a total of 222,654 from holding NYSE Composite or generate 12.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Metropolitan West High
Performance |
| Timeline |
NYSE Composite and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Metropolitan West High
Pair trading matchups for Metropolitan West
Pair Trading with NYSE Composite and Metropolitan West
The main advantage of trading using opposite NYSE Composite and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Metropolitan West 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 Metropolitan West will offset losses from the drop in Metropolitan West's long position.| NYSE Composite vs. Lindblad Expeditions Holdings | NYSE Composite vs. LB Foster | NYSE Composite vs. HUTCHMED DRC | NYSE Composite vs. Bridgford Foods |
| Metropolitan West vs. Fidelity Capital Income | Metropolitan West vs. Pgim High Yield | Metropolitan West vs. Virtus High Yield | Metropolitan West vs. Gmo High Yield |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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