Correlation Between MFS Investment and First Trust
Can any of the company-specific risk be diversified away by investing in both MFS Investment 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 Investment 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 Investment Grade and First Trust Senior, you can compare the effects of market volatilities on MFS Investment 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 Investment with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS Investment and First Trust.
Diversification Opportunities for MFS Investment and First Trust
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between MFS and First is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior and MFS Investment 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 Investment Grade 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 Senior has no effect on the direction of MFS Investment i.e., MFS Investment and First Trust go up and down completely randomly.
Pair Corralation between MFS Investment and First Trust
Considering the 90-day investment horizon MFS Investment is expected to generate 2.48 times less return on investment than First Trust. But when comparing it to its historical volatility, MFS Investment Grade is 1.18 times less risky than First Trust. It trades about 0.04 of its potential returns per unit of risk. First Trust Senior is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,009 in First Trust Senior on August 29, 2024 and sell it today you would earn a total of 29.00 from holding First Trust Senior or generate 2.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MFS Investment Grade vs. First Trust Senior
Performance |
| Timeline |
| MFS Investment Grade |
| First Trust Senior |
MFS Investment and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFS Investment and First Trust
The main advantage of trading using opposite MFS Investment and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFS Investment 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 Investment vs. Invesco High Income | MFS Investment vs. Eaton Vance National | MFS Investment vs. Nuveen California Select | MFS Investment vs. Federated Premier Municipal |
| First Trust vs. Eaton Vance National | First Trust vs. Invesco High Income | First Trust vs. Blackrock Muniholdings Ny | First Trust vs. Nuveen California Select |
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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