Correlation Between Oppenheimer Gold and Metropolitan West

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

By analyzing existing cross correlation between Oppenheimer Gold Special and Metropolitan West Low, you can compare the effects of market volatilities on Oppenheimer Gold and Metropolitan West 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 Oppenheimer Gold with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oppenheimer Gold and Metropolitan West.

Diversification Opportunities for Oppenheimer Gold and Metropolitan West

0.62

Correlation Coefficient

Oppenheimer Gold  Metropolitan West

Poor diversification

The 3 months correlation between Oppenheimer and Metropolitan is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Oppenheimer Gold Special and Metropolitan West Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West Low and Oppenheimer Gold 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 Oppenheimer Gold Special are associated (or correlated) with Metropolitan West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan West Low has no effect on the direction of Oppenheimer Gold i.e., Oppenheimer Gold and Metropolitan West go up and down completely randomly.

Pair Corralation between Oppenheimer Gold and Metropolitan West

Assuming the 90 days horizon Oppenheimer Gold Special is expected to generate 12.05 times more return on investment than Metropolitan West. However, Oppenheimer Gold is 12.05 times more volatile than Metropolitan West Low. It trades about 0.02 of its potential returns per unit of risk. Metropolitan West Low is currently generating about 0.13 per unit of risk. If you would invest  2,510  in Oppenheimer Gold Special on December 3, 2024 and sell it today you would earn a total of  27.00  from holding Oppenheimer Gold Special 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

Oppenheimer Gold Special  vs.  Metropolitan West Low

Oppenheimer Gold Special

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oppenheimer Gold Special are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Oppenheimer Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Metropolitan West Low

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan West Low are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Oppenheimer Gold and Metropolitan West

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

The idea behind Oppenheimer Gold Special and Metropolitan West Low 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.