Correlation Between Metropolitan West and Crm Smallmid

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

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

Diversification Opportunities for Metropolitan West and Crm Smallmid

-0.56

Correlation Coefficient

Metropolitan West  Crm Smallmid

Excellent diversification

The 3 months correlation between Metropolitan and Crm is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Low and Crm Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crm Smallmid Cap 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 Low are associated (or correlated) with Crm Smallmid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crm Smallmid Cap has no effect on the direction of Metropolitan West i.e., Metropolitan West and Crm Smallmid go up and down completely randomly.

Pair Corralation between Metropolitan West and Crm Smallmid

Assuming the 90 days horizon Metropolitan West Low is expected to under-perform the Crm Smallmid. But the mutual fund apears to be less risky and, when comparing its historical volatility, Metropolitan West Low is 7.0 times less risky than Crm Smallmid. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Crm Smallmid Cap is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,027  in Crm Smallmid Cap on September 12, 2024 and sell it today you would earn a total of  111.00  from holding Crm Smallmid Cap or generate 10.81% return on investment over 90 days.

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

Metropolitan West Low  vs.  Crm Smallmid Cap

Metropolitan West Low

Risk-Adjusted Performance

0 of 100

Very Weak

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

Crm Smallmid Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crm Smallmid Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Crm Smallmid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Metropolitan West and Crm Smallmid

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

The idea behind Metropolitan West Low and Crm Smallmid Cap 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.