Correlation Between Dow Jones and Mfs Technology
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Mfs Technology 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 Dow Jones and Mfs Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Mfs Technology Fund, you can compare the effects of market volatilities on Dow Jones and Mfs Technology 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 Dow Jones with a short position of Mfs Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Mfs Technology.
Diversification Opportunities for Dow Jones and Mfs Technology
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Mfs is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Mfs Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Technology and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Mfs Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Technology has no effect on the direction of Dow Jones i.e., Dow Jones and Mfs Technology go up and down completely randomly.
Pair Corralation between Dow Jones and Mfs Technology
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Mfs Technology. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 1.72 times less risky than Mfs Technology. The index trades about -0.22 of its potential returns per unit of risk. The Mfs Technology Fund is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 7,335 in Mfs Technology Fund on November 27, 2024 and sell it today you would lose (83.00) from holding Mfs Technology Fund or give up 1.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Mfs Technology Fund
Performance |
| Timeline |
Dow Jones and Mfs Technology Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Mfs Technology Fund
Pair trading matchups for Mfs Technology
Pair Trading with Dow Jones and Mfs Technology
The main advantage of trading using opposite Dow Jones and Mfs Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Mfs Technology 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 Technology will offset losses from the drop in Mfs Technology's long position.The idea behind Dow Jones Industrial and Mfs Technology Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Mfs Technology vs. Tiaa Cref Funds | Mfs Technology vs. First American Funds | Mfs Technology vs. Dreyfus Institutional Reserves | Mfs Technology vs. Franklin Government Money |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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