Correlation Between Metropolitan West and Western Asset
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and Western Asset 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 Metropolitan West and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metropolitan West High and Western Asset High, you can compare the effects of market volatilities on Metropolitan West and Western Asset 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 Metropolitan West with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Western Asset.
Diversification Opportunities for Metropolitan West and Western Asset
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Metropolitan and Western is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West High and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and Metropolitan West 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 Metropolitan West High are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of Metropolitan West i.e., Metropolitan West and Western Asset go up and down completely randomly.
Pair Corralation between Metropolitan West and Western Asset
Assuming the 90 days horizon Metropolitan West High is expected to generate 0.78 times more return on investment than Western Asset. However, Metropolitan West High is 1.28 times less risky than Western Asset. It trades about 0.32 of its potential returns per unit of risk. Western Asset High is currently generating about 0.23 per unit of risk. If you would invest 907.00 in Metropolitan West High on February 24, 2024 and sell it today you would earn a total of 13.00 from holding Metropolitan West High or generate 1.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Metropolitan West High vs. Western Asset High
Performance |
Timeline |
Metropolitan West High |
Western Asset High |
Metropolitan West and Western Asset Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Metropolitan West and Western Asset
The main advantage of trading using opposite Metropolitan West and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.Metropolitan West vs. Vanguard High Yield Porate | Metropolitan West vs. Blackrock Hi Yld | Metropolitan West vs. American Funds American | Metropolitan West vs. HUMANA INC |
Western Asset vs. Vanguard High Yield Porate | Western Asset vs. Blackrock Hi Yld | Western Asset vs. American Funds American | Western Asset vs. HUMANA INC |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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