Correlation Between Metropolitan West and Queens Road

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

By analyzing existing cross correlation between Metropolitan West Intermediate and Queens Road Small, you can compare the effects of market volatilities on Metropolitan West and Queens Road 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 Queens Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Queens Road.

Diversification Opportunities for Metropolitan West and Queens Road

-0.68

Correlation Coefficient

Metropolitan West  Queens Road

Excellent diversification

The 3 months correlation between Metropolitan and Queens is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Intermediate and Queens Road Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Queens Road Small 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 Intermediate are associated (or correlated) with Queens Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Queens Road Small has no effect on the direction of Metropolitan West i.e., Metropolitan West and Queens Road go up and down completely randomly.

Pair Corralation between Metropolitan West and Queens Road

Assuming the 90 days horizon Metropolitan West Intermediate is expected to under-perform the Queens Road. But the mutual fund apears to be less risky and, when comparing its historical volatility, Metropolitan West Intermediate is 4.27 times less risky than Queens Road. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Queens Road Small is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,942  in Queens Road Small on September 17, 2024 and sell it today you would earn a total of  332.00  from holding Queens Road Small or generate 8.42% return on investment over 90 days.

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

Metropolitan West Intermediate  vs.  Queens Road Small

Metropolitan West

Risk-Adjusted Performance

0 of 100

Very Weak

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

Queens Road Small

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Queens Road Small are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Queens Road may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Metropolitan West and Queens Road

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

The idea behind Metropolitan West Intermediate and Queens Road Small 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.