Correlation Between Doubleline Floating and Metropolitan West

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

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

Diversification Opportunities for Doubleline Floating and Metropolitan West

0.64

Correlation Coefficient

Doubleline Floating  Metropolitan West

Poor diversification

The 3 months correlation between Doubleline and Metropolitan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Doubleline Floating Rate and Metropolitan West Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West and Doubleline Floating 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 Doubleline Floating Rate 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 Doubleline Floating i.e., Doubleline Floating and Metropolitan West go up and down completely randomly.

Pair Corralation between Doubleline Floating and Metropolitan West

Assuming the 90 days horizon Doubleline Floating is expected to generate 315.06 times less return on investment than Metropolitan West. But when comparing it to its historical volatility, Doubleline Floating Rate is 526.03 times less risky than Metropolitan West. It trades about 0.23 of its potential returns per unit of risk. Metropolitan West Floating is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  886.00  in Metropolitan West Floating on August 31, 2024 and sell it today you would earn a total of  3,875  from holding Metropolitan West Floating or generate 437.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.06%
Values	Daily Returns

Doubleline Floating Rate  vs.  Metropolitan West Floating

Doubleline Floating Rate

Risk-Adjusted Performance

17 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Doubleline Floating Rate are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Doubleline Floating 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

OK

Over the last 90 days Metropolitan West Floating has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak essential indicators, Metropolitan West showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Doubleline Floating and Metropolitan West

The main advantage of trading using opposite Doubleline Floating and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Doubleline Floating 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 Doubleline Floating Rate and Metropolitan West Floating 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 Stocks Directory module to find actively traded stocks across global markets.