Correlation Between MFS High and First Trust
Can any of the company-specific risk be diversified away by investing in both MFS High 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 MFS High and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFS High Income and First Trust Specialty, you can compare the effects of market volatilities on MFS High 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 MFS High with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS High and First Trust.
Diversification Opportunities for MFS High and First Trust
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between MFS and First is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding MFS High Income and First Trust Specialty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Specialty and MFS High 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 MFS High Income 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 Specialty has no effect on the direction of MFS High i.e., MFS High and First Trust go up and down completely randomly.
Pair Corralation between MFS High and First Trust
Considering the 90-day investment horizon MFS High is expected to generate 1.61 times less return on investment than First Trust. But when comparing it to its historical volatility, MFS High Income is 1.84 times less risky than First Trust. It trades about 0.11 of its potential returns per unit of risk. First Trust Specialty is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 370.00 in First Trust Specialty on August 30, 2024 and sell it today you would earn a total of 54.00 from holding First Trust Specialty or generate 14.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MFS High Income vs. First Trust Specialty
Performance |
| Timeline |
| MFS High Income |
| First Trust Specialty |
MFS High and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFS High and First Trust
The main advantage of trading using opposite MFS High and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFS High 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.| MFS High vs. MFS Investment Grade | MFS High vs. Eaton Vance National | MFS High vs. Invesco High Income | MFS High vs. Blackrock Muniholdings Ny |
| First Trust vs. Tekla Life Sciences | First Trust vs. Royce Value Closed | First Trust vs. Flaherty and Crumrine | First Trust vs. Aquagold International |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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