Correlation Between Cref Inflation-linked and Metropolitan West

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

By analyzing existing cross correlation between Cref Inflation Linked Bond and Metropolitan West Strategic, you can compare the effects of market volatilities on Cref Inflation-linked 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 Cref Inflation-linked with a short position of Metropolitan West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cref Inflation-linked and Metropolitan West.

Diversification Opportunities for Cref Inflation-linked and Metropolitan West

0.86

Correlation Coefficient

Cref Inflation-linked  Metropolitan West

Very poor diversification

The 3 months correlation between CREF and Metropolitan is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Cref Inflation Linked Bond and Metropolitan West Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West and Cref Inflation-linked 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 Cref Inflation Linked Bond 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 Cref Inflation-linked i.e., Cref Inflation-linked and Metropolitan West go up and down completely randomly.

Pair Corralation between Cref Inflation-linked and Metropolitan West

Assuming the 90 days trading horizon Cref Inflation-linked is expected to generate 2.48 times less return on investment than Metropolitan West. In addition to that, Cref Inflation-linked is 1.06 times more volatile than Metropolitan West Strategic. It trades about 0.02 of its total potential returns per unit of risk. Metropolitan West Strategic is currently generating about 0.04 per unit of volatility. If you would invest  617.00  in Metropolitan West Strategic on September 3, 2024 and sell it today you would earn a total of  3.00  from holding Metropolitan West Strategic or generate 0.49% return on investment over 90 days.

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

Cref Inflation Linked Bond  vs.  Metropolitan West Strategic

Cref Inflation Linked

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cref Inflation Linked Bond are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Cref Inflation-linked 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

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan West Strategic are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Cref Inflation-linked and Metropolitan West

The main advantage of trading using opposite Cref Inflation-linked and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cref Inflation-linked 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 Cref Inflation Linked Bond and Metropolitan West Strategic 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.