Correlation Between MFS Investment and Potomac Bancshares
Can any of the company-specific risk be diversified away by investing in both MFS Investment and Potomac Bancshares 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 Potomac Bancshares 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 Potomac Bancshares, you can compare the effects of market volatilities on MFS Investment and Potomac Bancshares 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 Potomac Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS Investment and Potomac Bancshares.
Diversification Opportunities for MFS Investment and Potomac Bancshares
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between MFS and Potomac is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and Potomac Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potomac Bancshares 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 Potomac Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potomac Bancshares has no effect on the direction of MFS Investment i.e., MFS Investment and Potomac Bancshares go up and down completely randomly.
Pair Corralation between MFS Investment and Potomac Bancshares
Considering the 90-day investment horizon MFS Investment Grade is expected to generate 0.3 times more return on investment than Potomac Bancshares. However, MFS Investment Grade is 3.38 times less risky than Potomac Bancshares. It trades about 0.06 of its potential returns per unit of risk. Potomac Bancshares is currently generating about 0.01 per unit of risk. If you would invest 675.00 in MFS Investment Grade on August 30, 2024 and sell it today you would earn a total of 146.00 from holding MFS Investment Grade or generate 21.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 88.28% |
| Values | Daily Returns |
MFS Investment Grade vs. Potomac Bancshares
Performance |
| Timeline |
| MFS Investment Grade |
| Potomac Bancshares |
MFS Investment and Potomac Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFS Investment and Potomac Bancshares
The main advantage of trading using opposite MFS Investment and Potomac Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFS Investment position performs unexpectedly, Potomac Bancshares 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 Potomac Bancshares will offset losses from the drop in Potomac Bancshares' 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 |
| Potomac Bancshares vs. Apollo Bancorp | Potomac Bancshares vs. The Farmers Bank | Potomac Bancshares vs. Community Bankers | Potomac Bancshares vs. CCSB Financial Corp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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