Correlation Between GM and Mfs Technology
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Mfs Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Mfs Technology Fund, you can compare the effects of market volatilities on GM 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 GM with a short position of Mfs Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Mfs Technology.
Diversification Opportunities for GM and Mfs Technology
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Mfs is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mfs Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Technology and GM 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 General Motors 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 GM i.e., GM and Mfs Technology go up and down completely randomly.
Pair Corralation between GM and Mfs Technology
Allowing for the 90-day total investment horizon GM is expected to generate 1.28 times less return on investment than Mfs Technology. In addition to that, GM is 1.58 times more volatile than Mfs Technology Fund. It trades about 0.05 of its total potential returns per unit of risk. Mfs Technology Fund is currently generating about 0.1 per unit of volatility. If you would invest 4,484 in Mfs Technology Fund on September 3, 2024 and sell it today you would earn a total of 3,590 from holding Mfs Technology Fund or generate 80.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Mfs Technology Fund
Performance |
| Timeline |
| General Motors |
| Mfs Technology |
GM and Mfs Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Mfs Technology
The main advantage of trading using opposite GM and Mfs Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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. Vanguard Information Technology | Mfs Technology vs. Technology Portfolio Technology | Mfs Technology vs. Fidelity Select Semiconductors | Mfs Technology vs. Software And It |
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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