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 Low, 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
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and Metropolitan is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Metropolitan West Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West Low 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 Low 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 4.91 times more return on investment than Metropolitan West. However, NYSE Composite is 4.91 times more volatile than Metropolitan West Low. It trades about 0.24 of its potential returns per unit of risk. Metropolitan West Low is currently generating about 0.04 per unit of risk. If you would invest 1,954,967 in NYSE Composite on August 28, 2024 and sell it today you would earn a total of 67,069 from holding NYSE Composite or generate 3.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
NYSE Composite vs. Metropolitan West Low
Performance |
| Timeline |
NYSE Composite and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Metropolitan West Low
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. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| Metropolitan West vs. Metropolitan West Alpha | Metropolitan West vs. Metropolitan West Porate | Metropolitan West vs. Metropolitan West Unconstrained | Metropolitan West vs. Metropolitan West Porate |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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