Correlation Between Metropolitan West and International Fund

Can any of the company-specific risk be diversified away by investing in both Metropolitan West and International Fund 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 International Fund 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 International Fund International, you can compare the effects of market volatilities on Metropolitan West and International Fund 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 International Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and International Fund.

Diversification Opportunities for Metropolitan West and International Fund

0.77

Correlation Coefficient

Metropolitan West  International Fund

Poor diversification

The 3 months correlation between Metropolitan and International is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Total and International Fund Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Fund 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 International Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Fund has no effect on the direction of Metropolitan West i.e., Metropolitan West and International Fund go up and down completely randomly.

Pair Corralation between Metropolitan West and International Fund

Assuming the 90 days horizon Metropolitan West is expected to generate 1.99 times less return on investment than International Fund. But when comparing it to its historical volatility, Metropolitan West Total is 1.63 times less risky than International Fund. It trades about 0.03 of its potential returns per unit of risk. International Fund International is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,703  in International Fund International on November 29, 2024 and sell it today you would earn a total of  40.00  from holding International Fund International or generate 1.08% return on investment over 90 days.

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

Metropolitan West Total  vs.  International Fund Internation

Metropolitan West Total

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan West Total are ranked lower than 2 (%) 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.

International Fund

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Fund International are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, International Fund 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 International Fund

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

The idea behind Metropolitan West Total and International Fund International 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.