Correlation Between Diamond Hill and MFS Municipal
Can any of the company-specific risk be diversified away by investing in both Diamond Hill and MFS Municipal 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 Diamond Hill and MFS Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamond Hill Investment and MFS Municipal Income, you can compare the effects of market volatilities on Diamond Hill and MFS Municipal 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 Diamond Hill with a short position of MFS Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamond Hill and MFS Municipal.
Diversification Opportunities for Diamond Hill and MFS Municipal
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Diamond and MFS is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Diamond Hill Investment and MFS Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Municipal Income and Diamond Hill 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 Diamond Hill Investment are associated (or correlated) with MFS Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Municipal Income has no effect on the direction of Diamond Hill i.e., Diamond Hill and MFS Municipal go up and down completely randomly.
Pair Corralation between Diamond Hill and MFS Municipal
Given the investment horizon of 90 days Diamond Hill Investment is expected to generate 3.2 times more return on investment than MFS Municipal. However, Diamond Hill is 3.2 times more volatile than MFS Municipal Income. It trades about 0.25 of its potential returns per unit of risk. MFS Municipal Income is currently generating about 0.16 per unit of risk. If you would invest 14,959 in Diamond Hill Investment on September 1, 2024 and sell it today you would earn a total of 1,576 from holding Diamond Hill Investment or generate 10.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamond Hill Investment vs. MFS Municipal Income
Performance |
| Timeline |
| Diamond Hill Investment |
| MFS Municipal Income |
Diamond Hill and MFS Municipal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamond Hill and MFS Municipal
The main advantage of trading using opposite Diamond Hill and MFS Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamond Hill position performs unexpectedly, MFS Municipal 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 Municipal will offset losses from the drop in MFS Municipal's long position.| Diamond Hill vs. Federated Premier Municipal | Diamond Hill vs. Blackrock Muniyield | Diamond Hill vs. NXG NextGen Infrastructure | Diamond Hill vs. Federated Investors B |
| MFS Municipal vs. Eaton Vance National | MFS Municipal vs. Invesco High Income | MFS Municipal vs. Blackrock Muniholdings Ny | MFS Municipal 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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