Correlation Between The Jensen and Metropolitan West

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

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

Diversification Opportunities for The Jensen and Metropolitan West

-0.32

Correlation Coefficient

The Jensen  Metropolitan West

Very good diversification

The 3 months correlation between The and METROPOLITAN is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding The Jensen Portfolio 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 The Jensen 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 The Jensen Portfolio 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 The Jensen i.e., The Jensen and Metropolitan West go up and down completely randomly.

Pair Corralation between The Jensen and Metropolitan West

Assuming the 90 days horizon The Jensen Portfolio is expected to under-perform the Metropolitan West. In addition to that, The Jensen is 2.25 times more volatile than Metropolitan West Total. It trades about -0.06 of its total potential returns per unit of risk. Metropolitan West Total is currently generating about 0.12 per unit of volatility. If you would invest  879.00  in Metropolitan West Total on December 30, 2024 and sell it today you would earn a total of  22.00  from holding Metropolitan West Total or generate 2.5% return on investment over 90 days.

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

The Jensen Portfolio  vs.  Metropolitan West Total

Jensen Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Jensen Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, The Jensen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Metropolitan West Total

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan West Total are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. 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 The Jensen and Metropolitan West

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

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.