Correlation Between Core Fixed and Metropolitan West

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

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

Diversification Opportunities for Core Fixed and Metropolitan West

0.6

Correlation Coefficient

Core Fixed  Metropolitan West

Poor diversification

The 3 months correlation between Core and Metropolitan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Core Fixed Income and Metropolitan West High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan West High and Core Fixed 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 Core Fixed Income 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 High has no effect on the direction of Core Fixed i.e., Core Fixed and Metropolitan West go up and down completely randomly.

Pair Corralation between Core Fixed and Metropolitan West

Assuming the 90 days horizon Core Fixed Income is expected to generate 1.78 times more return on investment than Metropolitan West. However, Core Fixed is 1.78 times more volatile than Metropolitan West High. It trades about 0.13 of its potential returns per unit of risk. Metropolitan West High is currently generating about 0.22 per unit of risk. If you would invest  665.00  in Core Fixed Income on May 15, 2025 and sell it today you would earn a total of  15.00  from holding Core Fixed Income or generate 2.26% return on investment over 90 days.

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

Core Fixed Income  vs.  Metropolitan West High

Core Fixed Income

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Core Fixed Income are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Core Fixed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Metropolitan West High

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan West High are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward 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 Core Fixed and Metropolitan West

The main advantage of trading using opposite Core Fixed and Metropolitan West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Core Fixed 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 Core Fixed Income and Metropolitan West 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.