Correlation Between Redwood Real and Mfs Value
Can any of the company-specific risk be diversified away by investing in both Redwood Real and Mfs Value 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 Redwood Real and Mfs Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Redwood Real Estate and Mfs Value Fund, you can compare the effects of market volatilities on Redwood Real and Mfs Value 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 Redwood Real with a short position of Mfs Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redwood Real and Mfs Value.
Diversification Opportunities for Redwood Real and Mfs Value
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Redwood and Mfs is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Redwood Real Estate and Mfs Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Value Fund and Redwood Real 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 Redwood Real Estate are associated (or correlated) with Mfs Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Value Fund has no effect on the direction of Redwood Real i.e., Redwood Real and Mfs Value go up and down completely randomly.
Pair Corralation between Redwood Real and Mfs Value
Assuming the 90 days horizon Redwood Real is expected to generate 3.38 times less return on investment than Mfs Value. But when comparing it to its historical volatility, Redwood Real Estate is 12.32 times less risky than Mfs Value. It trades about 0.56 of its potential returns per unit of risk. Mfs Value Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 4,233 in Mfs Value Fund on September 1, 2024 and sell it today you would earn a total of 1,201 from holding Mfs Value Fund or generate 28.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Redwood Real Estate vs. Mfs Value Fund
Performance |
| Timeline |
| Redwood Real Estate |
| Mfs Value Fund |
Redwood Real and Mfs Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Redwood Real and Mfs Value
The main advantage of trading using opposite Redwood Real and Mfs Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Redwood Real position performs unexpectedly, Mfs Value 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 Value will offset losses from the drop in Mfs Value's long position.| Redwood Real vs. Tax Managed Mid Small | Redwood Real vs. The Gabelli Small | Redwood Real vs. Harbor Diversified International | Redwood Real vs. Fidelity Advisor Diversified |
| Mfs Value vs. Davis Financial Fund | Mfs Value vs. Davis Financial Fund | Mfs Value vs. Prudential Jennison Financial | Mfs Value vs. John Hancock Financial |
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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