Correlation Between Metropolitan West and Pgim High

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

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

Diversification Opportunities for Metropolitan West and Pgim High

-0.21

Correlation Coefficient

Metropolitan West  Pgim High

Very good diversification

The 3 months correlation between Metropolitan and Pgim is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Total and Pgim High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pgim High Yield 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 Total are associated (or correlated) with Pgim High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pgim High Yield has no effect on the direction of Metropolitan West i.e., Metropolitan West and Pgim High go up and down completely randomly.

Pair Corralation between Metropolitan West and Pgim High

Assuming the 90 days horizon Metropolitan West Total is expected to generate 2.55 times more return on investment than Pgim High. However, Metropolitan West is 2.55 times more volatile than Pgim High Yield. It trades about 0.08 of its potential returns per unit of risk. Pgim High Yield is currently generating about 0.07 per unit of risk. If you would invest  902.00  in Metropolitan West Total on September 5, 2024 and sell it today you would earn a total of  6.00  from holding Metropolitan West Total or generate 0.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Metropolitan West Total  vs.  Pgim High Yield

Metropolitan West Total

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pgim High Yield

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pgim High Yield are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Pgim High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Metropolitan West and Pgim High

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

The idea behind Metropolitan West Total and Pgim High Yield 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.