Correlation Between Metropolitan West and Alliancebernstein

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

By analyzing existing cross correlation between Metropolitan West Total and Alliancebernstein Global High, you can compare the effects of market volatilities on Metropolitan West and Alliancebernstein 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 Alliancebernstein. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and Alliancebernstein.

Diversification Opportunities for Metropolitan West and Alliancebernstein

0.65

Correlation Coefficient

Metropolitan West  Alliancebernstein

Poor diversification

The 3 months correlation between Metropolitan and Alliancebernstein is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Total and Alliancebernstein Global High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliancebernstein 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 Total are associated (or correlated) with Alliancebernstein. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliancebernstein has no effect on the direction of Metropolitan West i.e., Metropolitan West and Alliancebernstein go up and down completely randomly.

Pair Corralation between Metropolitan West and Alliancebernstein

Assuming the 90 days horizon Metropolitan West Total is expected to under-perform the Alliancebernstein. But the mutual fund apears to be less risky and, when comparing its historical volatility, Metropolitan West Total is 1.18 times less risky than Alliancebernstein. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Alliancebernstein Global High is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,082  in Alliancebernstein Global High on September 12, 2024 and sell it today you would earn a total of  5.00  from holding Alliancebernstein Global High or generate 0.46% return on investment over 90 days.

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

Metropolitan West Total  vs.  Alliancebernstein Global High

Metropolitan West Total

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metropolitan West Total has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Metropolitan West is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alliancebernstein

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alliancebernstein Global High are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, Alliancebernstein is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Metropolitan West and Alliancebernstein

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

The idea behind Metropolitan West Total and Alliancebernstein Global High 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.