Correlation Between Global Bond and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both Global Bond 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 Global Bond and Metropolitan West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Bond Fund and Metropolitan West High, you can compare the effects of market volatilities on Global Bond 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 Global Bond with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Bond and Metropolitan West.
Diversification Opportunities for Global Bond and Metropolitan West
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Global and Metropolitan is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Global Bond Fund 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 Global Bond 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 Global Bond Fund 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 Global Bond i.e., Global Bond and Metropolitan West go up and down completely randomly.
Pair Corralation between Global Bond and Metropolitan West
Assuming the 90 days horizon Global Bond is expected to generate 1.47 times less return on investment than Metropolitan West. But when comparing it to its historical volatility, Global Bond Fund is 1.09 times less risky than Metropolitan West. It trades about 0.1 of its potential returns per unit of risk. Metropolitan West High is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 821.00 in Metropolitan West High on August 27, 2024 and sell it today you would earn a total of 113.00 from holding Metropolitan West High or generate 13.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Bond Fund vs. Metropolitan West High
Performance |
| Timeline |
| Global Bond Fund |
| Metropolitan West High |
Global Bond and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Bond and Metropolitan West
The main advantage of trading using opposite Global Bond and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Bond 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.| Global Bond vs. Pimco Rae Worldwide | Global Bond vs. Pimco Rae Worldwide | Global Bond vs. Pimco Rae Worldwide | Global Bond vs. Pimco Rae Worldwide |
| Metropolitan West vs. Federated Total Return | Metropolitan West vs. Global Bond Fund | Metropolitan West vs. Government Bond Fund | Metropolitan West vs. Metropolitan West Total |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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