Correlation Between Glg Intl and Metropolitan West

Can any of the company-specific risk be diversified away by investing in both Glg Intl 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 Glg Intl and Metropolitan West into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Glg Intl Small and Metropolitan West Ultra, you can compare the effects of market volatilities on Glg Intl 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 Glg Intl with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glg Intl and Metropolitan West.

Diversification Opportunities for Glg Intl and Metropolitan West

0.75

Correlation Coefficient

Glg Intl  Metropolitan West

Poor diversification

The 3 months correlation between Glg and Metropolitan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Glg Intl Small and Metropolitan West Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West Ultra and Glg Intl 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 Glg Intl Small 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 Ultra has no effect on the direction of Glg Intl i.e., Glg Intl and Metropolitan West go up and down completely randomly.

Pair Corralation between Glg Intl and Metropolitan West

Assuming the 90 days horizon Glg Intl Small is expected to generate 5.92 times more return on investment than Metropolitan West. However, Glg Intl is 5.92 times more volatile than Metropolitan West Ultra. It trades about 0.08 of its potential returns per unit of risk. Metropolitan West Ultra is currently generating about 0.1 per unit of risk. If you would invest  5,947  in Glg Intl Small on October 27, 2024 and sell it today you would earn a total of  2,925  from holding Glg Intl Small or generate 49.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Glg Intl Small  vs.  Metropolitan West Ultra

Glg Intl Small

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Glg Intl Small are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Glg Intl may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Metropolitan West Ultra

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan West Ultra are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Metropolitan West is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Glg Intl and Metropolitan West

The main advantage of trading using opposite Glg Intl and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glg Intl 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.

The idea behind Glg Intl Small and Metropolitan West Ultra pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.