Correlation Between Victory High and Metropolitan West

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

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

Diversification Opportunities for Victory High and Metropolitan West

0.45

Correlation Coefficient

Victory High  Metropolitan West

Very weak diversification

The 3 months correlation between Victory and Metropolitan is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Victory High Income and Metropolitan West Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West and Victory High 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 Victory High Income 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 has no effect on the direction of Victory High i.e., Victory High and Metropolitan West go up and down completely randomly.

Pair Corralation between Victory High and Metropolitan West

Assuming the 90 days horizon Victory High Income is expected to generate 1.5 times more return on investment than Metropolitan West. However, Victory High is 1.5 times more volatile than Metropolitan West Intermediate. It trades about 0.05 of its potential returns per unit of risk. Metropolitan West Intermediate is currently generating about -0.09 per unit of risk. If you would invest  975.00  in Victory High Income on September 12, 2024 and sell it today you would earn a total of  11.00  from holding Victory High Income or generate 1.13% return on investment over 90 days.

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

Victory High Income  vs.  Metropolitan West Intermediate

Victory High Income

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Victory High Income are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Victory High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 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 Victory High and Metropolitan West

The main advantage of trading using opposite Victory High and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Victory High 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 Victory High Income and Metropolitan West Intermediate 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.