Correlation Between Small Cap and Mfs Global
Can any of the company-specific risk be diversified away by investing in both Small Cap and Mfs Global 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 Small Cap and Mfs Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Growth and Mfs Global Alternative, you can compare the effects of market volatilities on Small Cap and Mfs Global 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 Small Cap with a short position of Mfs Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Mfs Global.
Diversification Opportunities for Small Cap and Mfs Global
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Small and MFS is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Mfs Global Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Global Alternative and Small Cap 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 Small Cap Growth are associated (or correlated) with Mfs Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Global Alternative has no effect on the direction of Small Cap i.e., Small Cap and Mfs Global go up and down completely randomly.
Pair Corralation between Small Cap and Mfs Global
Assuming the 90 days horizon Small Cap Growth is expected to generate 4.59 times more return on investment than Mfs Global. However, Small Cap is 4.59 times more volatile than Mfs Global Alternative. It trades about 0.1 of its potential returns per unit of risk. Mfs Global Alternative is currently generating about 0.16 per unit of risk. If you would invest 1,548 in Small Cap Growth on September 4, 2024 and sell it today you would earn a total of 468.00 from holding Small Cap Growth or generate 30.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Growth vs. Mfs Global Alternative
Performance |
| Timeline |
| Small Cap Growth |
| Mfs Global Alternative |
Small Cap and Mfs Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Mfs Global
The main advantage of trading using opposite Small Cap and Mfs Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Mfs Global 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 Mfs Global will offset losses from the drop in Mfs Global's long position.| Small Cap vs. Short Term Government Fund | Small Cap vs. Franklin Adjustable Government | Small Cap vs. Dws Government Money | Small Cap vs. Blackrock Government Bond |
| Mfs Global vs. Mfs Prudent Investor | Mfs Global vs. Mfs Prudent Investor | Mfs Global vs. Mfs Prudent Investor | Mfs Global vs. Mfs Prudent Investor |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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