Correlation Between Strats SM and MFS Investment
Can any of the company-specific risk be diversified away by investing in both Strats SM and MFS Investment 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 Strats SM and MFS Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strats SM Trust and MFS Investment Grade, you can compare the effects of market volatilities on Strats SM and MFS Investment 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 Strats SM with a short position of MFS Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strats SM and MFS Investment.
Diversification Opportunities for Strats SM and MFS Investment
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Strats and MFS is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Strats SM Trust and MFS Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Investment Grade and Strats SM 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 Strats SM Trust are associated (or correlated) with MFS Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Investment Grade has no effect on the direction of Strats SM i.e., Strats SM and MFS Investment go up and down completely randomly.
Pair Corralation between Strats SM and MFS Investment
Considering the 90-day investment horizon Strats SM is expected to generate 1.54 times less return on investment than MFS Investment. In addition to that, Strats SM is 2.45 times more volatile than MFS Investment Grade. It trades about 0.03 of its total potential returns per unit of risk. MFS Investment Grade is currently generating about 0.13 per unit of volatility. If you would invest 710.00 in MFS Investment Grade on September 3, 2024 and sell it today you would earn a total of 112.00 from holding MFS Investment Grade or generate 15.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 60.32% |
Values | Daily Returns |
Strats SM Trust vs. MFS Investment Grade
Performance |
Timeline |
Strats SM Trust |
MFS Investment Grade |
Strats SM and MFS Investment Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Strats SM and MFS Investment
The main advantage of trading using opposite Strats SM and MFS Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strats SM position performs unexpectedly, MFS Investment 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 Investment will offset losses from the drop in MFS Investment's long position.Strats SM vs. STRATS SM Trust | Strats SM vs. STRATSSM Certificates series | Strats SM vs. STRATS SM Trust | Strats SM vs. Strats SM Trust |
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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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