Correlation Between Metropolitan West and Ishares Municipal
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and Ishares Municipal 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 Ishares Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metropolitan West Investment and Ishares Municipal Bond, you can compare the effects of market volatilities on Metropolitan West and Ishares Municipal 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 Ishares Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Ishares Municipal.
Diversification Opportunities for Metropolitan West and Ishares Municipal
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Metropolitan and Ishares is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Investment and Ishares Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ishares Municipal Bond 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 Investment are associated (or correlated) with Ishares Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ishares Municipal Bond has no effect on the direction of Metropolitan West i.e., Metropolitan West and Ishares Municipal go up and down completely randomly.
Pair Corralation between Metropolitan West and Ishares Municipal
Assuming the 90 days horizon Metropolitan West Investment is expected to under-perform the Ishares Municipal. In addition to that, Metropolitan West is 1.02 times more volatile than Ishares Municipal Bond. It trades about -0.09 of its total potential returns per unit of risk. Ishares Municipal Bond is currently generating about 0.03 per unit of volatility. If you would invest 1,113 in Ishares Municipal Bond on September 13, 2024 and sell it today you would earn a total of 5.00 from holding Ishares Municipal Bond or generate 0.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Metropolitan West Investment vs. Ishares Municipal Bond
Performance |
Timeline |
Metropolitan West |
Ishares Municipal Bond |
Metropolitan West and Ishares Municipal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Metropolitan West and Ishares Municipal
The main advantage of trading using opposite Metropolitan West and Ishares Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, Ishares Municipal 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 Ishares Municipal will offset losses from the drop in Ishares Municipal's long position.Metropolitan West vs. Ishares Municipal Bond | Metropolitan West vs. Blrc Sgy Mnp | Metropolitan West vs. The National Tax Free | Metropolitan West vs. Doubleline Yield Opportunities |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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