Correlation Between Western Asset and Metropolitan West
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and Metropolitan West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Mortgage and Metropolitan West Total, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Metropolitan West.
Diversification Opportunities for Western Asset and Metropolitan West
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Western and Metropolitan is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage 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 Western Asset 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 Western Asset Mortgage 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 Western Asset i.e., Western Asset and Metropolitan West go up and down completely randomly.
Pair Corralation between Western Asset and Metropolitan West
Assuming the 90 days horizon Western Asset is expected to generate 1.02 times less return on investment than Metropolitan West. But when comparing it to its historical volatility, Western Asset Mortgage is 1.2 times less risky than Metropolitan West. It trades about 0.2 of its potential returns per unit of risk. Metropolitan West Total is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 897.00 in Metropolitan West Total on September 13, 2024 and sell it today you would earn a total of 10.00 from holding Metropolitan West Total or generate 1.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Mortgage vs. Metropolitan West Total
Performance |
| Timeline |
| Western Asset Mortgage |
| Metropolitan West Total |
Western Asset and Metropolitan West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Metropolitan West
The main advantage of trading using opposite Western Asset and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. T Rowe Price | Western Asset vs. T Rowe Price | Western Asset vs. Fm Investments Large | Western Asset vs. Fisher Large Cap |
| Metropolitan West vs. Loomis Sayles Bond | Metropolitan West vs. Doubleline Total Return | Metropolitan West vs. Baird E Plus | Metropolitan West vs. Harbor International Fund |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |