Correlation Between Sp Smallcap and Metropolitan West

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

By analyzing existing cross correlation between Sp Smallcap 600 and Metropolitan West Porate, you can compare the effects of market volatilities on Sp Smallcap 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 Sp Smallcap with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Smallcap and Metropolitan West.

Diversification Opportunities for Sp Smallcap and Metropolitan West

0.81

Correlation Coefficient

Sp Smallcap  Metropolitan West

Very poor diversification

The 3 months correlation between RYSVX and Metropolitan is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sp Smallcap 600 and Metropolitan West Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West Porate and Sp Smallcap 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 Sp Smallcap 600 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 Porate has no effect on the direction of Sp Smallcap i.e., Sp Smallcap and Metropolitan West go up and down completely randomly.

Pair Corralation between Sp Smallcap and Metropolitan West

If you would invest  4,525  in Metropolitan West Porate on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Metropolitan West Porate or generate 0.0% return on investment over 90 days.

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

Sp Smallcap 600  vs.  Metropolitan West Porate

Sp Smallcap 600

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sp Smallcap 600 are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Sp Smallcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Metropolitan West Porate

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan West Porate are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Metropolitan West showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sp Smallcap and Metropolitan West

The main advantage of trading using opposite Sp Smallcap and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Smallcap 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 Sp Smallcap 600 and Metropolitan West Porate 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.