Correlation Between Quantitative and Metropolitan West

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

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

Diversification Opportunities for Quantitative and Metropolitan West

0.07

Correlation Coefficient

Quantitative  Metropolitan West

Significant diversification

The 3 months correlation between Quantitative and Metropolitan is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Quantitative U S and Metropolitan West Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West Porate and Quantitative 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 Quantitative U S 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 Porate has no effect on the direction of Quantitative i.e., Quantitative and Metropolitan West go up and down completely randomly.

Pair Corralation between Quantitative and Metropolitan West

Assuming the 90 days horizon Quantitative U S is expected to generate 2.18 times more return on investment than Metropolitan West. However, Quantitative is 2.18 times more volatile than Metropolitan West Porate. It trades about 0.03 of its potential returns per unit of risk. Metropolitan West Porate is currently generating about 0.05 per unit of risk. If you would invest  1,101  in Quantitative U S on October 5, 2024 and sell it today you would earn a total of  146.00  from holding Quantitative U S or generate 13.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.78%
Values	Daily Returns

Quantitative U S  vs.  Metropolitan West Porate

Quantitative U S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quantitative U S has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Metropolitan West Porate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metropolitan West Porate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic 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 Quantitative and Metropolitan West

The main advantage of trading using opposite Quantitative and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantitative 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 Quantitative U S and Metropolitan West Porate 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.