Correlation Between Metropolitan West and Mid Cap

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

By analyzing existing cross correlation between Metropolitan West Porate and Mid Cap 15x Strategy, you can compare the effects of market volatilities on Metropolitan West and Mid Cap 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 Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Mid Cap.

Diversification Opportunities for Metropolitan West and Mid Cap

-0.02

Correlation Coefficient

Metropolitan West  Mid Cap

Good diversification

The 3 months correlation between Metropolitan and Mid is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Porate and Mid Cap 15x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap 15x 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 Porate are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap 15x has no effect on the direction of Metropolitan West i.e., Metropolitan West and Mid Cap go up and down completely randomly.

Pair Corralation between Metropolitan West and Mid Cap

Assuming the 90 days horizon Metropolitan West Porate is expected to under-perform the Mid Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Metropolitan West Porate is 8.84 times less risky than Mid Cap. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Mid Cap 15x Strategy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,627  in Mid Cap 15x Strategy on October 24, 2024 and sell it today you would earn a total of  758.00  from holding Mid Cap 15x Strategy or generate 7.13% return on investment over 90 days.

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

Metropolitan West Porate  vs.  Mid Cap 15x Strategy

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.

Mid Cap 15x

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap 15x Strategy are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Mid Cap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Metropolitan West and Mid Cap

The main advantage of trading using opposite Metropolitan West and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.

The idea behind Metropolitan West Porate and Mid Cap 15x Strategy 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.