Correlation Between Mid Cap and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both Mid Cap 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 Mid Cap and Metropolitan West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap 15x Strategy and Metropolitan West Total, you can compare the effects of market volatilities on Mid Cap 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 Mid Cap with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Metropolitan West.
Diversification Opportunities for Mid Cap and Metropolitan West
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Mid and Metropolitan is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy 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 Mid Cap 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 Mid Cap 15x Strategy 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 Mid Cap i.e., Mid Cap and Metropolitan West go up and down completely randomly.
Pair Corralation between Mid Cap and Metropolitan West
Assuming the 90 days horizon Mid Cap 15x Strategy is expected to generate 3.38 times more return on investment than Metropolitan West. However, Mid Cap is 3.38 times more volatile than Metropolitan West Total. It trades about 0.05 of its potential returns per unit of risk. Metropolitan West Total is currently generating about 0.04 per unit of risk. If you would invest 11,177 in Mid Cap 15x Strategy on September 12, 2024 and sell it today you would earn a total of 3,189 from holding Mid Cap 15x Strategy or generate 28.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap 15x Strategy vs. Metropolitan West Total
Performance |
| Timeline |
| Mid Cap 15x |
| Metropolitan West Total |
Mid Cap and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Metropolitan West
The main advantage of trading using opposite Mid Cap and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap 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.| Mid Cap vs. Western Asset Municipal | Mid Cap vs. Alliancebernstein National Municipal | Mid Cap vs. Multisector Bond Sma | Mid Cap vs. Ab Bond Inflation |
| 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 |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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