Correlation Between Total Return and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both Total Return 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 Total Return and Metropolitan West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Return Fund and Metropolitan West Total, you can compare the effects of market volatilities on Total Return 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 Total Return with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Return and Metropolitan West.
Diversification Opportunities for Total Return and Metropolitan West
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Total and Metropolitan is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Fund and Metropolitan West Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West Total and Total Return 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 Total Return 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 Total has no effect on the direction of Total Return i.e., Total Return and Metropolitan West go up and down completely randomly.
Pair Corralation between Total Return and Metropolitan West
Assuming the 90 days horizon Total Return is expected to generate 1.22 times less return on investment than Metropolitan West. But when comparing it to its historical volatility, Total Return Fund is 1.15 times less risky than Metropolitan West. It trades about 0.11 of its potential returns per unit of risk. Metropolitan West Total is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 903.00 in Metropolitan West Total on September 3, 2024 and sell it today you would earn a total of 9.00 from holding Metropolitan West Total or generate 1.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Total Return Fund vs. Metropolitan West Total
Performance |
| Timeline |
| Total Return |
| Metropolitan West Total |
Total Return and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Return and Metropolitan West
The main advantage of trading using opposite Total Return and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Return 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.| Total Return vs. Metropolitan West Total | Total Return vs. Metropolitan West Total | Total Return vs. Pimco Total Return | Total Return vs. Total Return Fund |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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