Correlation Between Metropolitan West and First Trust
Can any of the company-specific risk be diversified away by investing in both Metropolitan West and First Trust 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 First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metropolitan West High and First Trust Short, you can compare the effects of market volatilities on Metropolitan West and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metropolitan West and First Trust.
Diversification Opportunities for Metropolitan West and First Trust
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Metropolitan and First is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West High and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short 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 High are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Short has no effect on the direction of Metropolitan West i.e., Metropolitan West and First Trust go up and down completely randomly.
Pair Corralation between Metropolitan West and First Trust
Assuming the 90 days horizon Metropolitan West High is expected to generate 1.26 times more return on investment than First Trust. However, Metropolitan West is 1.26 times more volatile than First Trust Short. It trades about 0.27 of its potential returns per unit of risk. First Trust Short is currently generating about 0.31 per unit of risk. If you would invest 909.00 in Metropolitan West High on May 26, 2025 and sell it today you would earn a total of 26.00 from holding Metropolitan West High or generate 2.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metropolitan West High vs. First Trust Short
Performance |
| Timeline |
| Metropolitan West High |
| First Trust Short |
Metropolitan West and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metropolitan West and First Trust
The main advantage of trading using opposite Metropolitan West and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metropolitan West position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Metropolitan West vs. Federated Total Return | Metropolitan West vs. Global Bond Fund | Metropolitan West vs. Government Bond Fund | Metropolitan West vs. Aberdeen Global High |
| First Trust vs. Rbc Bluebay Emerging | First Trust vs. Ab Bond Inflation | First Trust vs. Franklin Emerging Market | First Trust vs. Doubleline Emerging Markets |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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