Correlation Between Western Asset and MFS Investment
Can any of the company-specific risk be diversified away by investing in both Western Asset 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 Western Asset and MFS Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset High and MFS Investment Grade, you can compare the effects of market volatilities on Western Asset 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 Western Asset with a short position of MFS Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and MFS Investment.
Diversification Opportunities for Western Asset and MFS Investment
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and MFS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High 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 Western Asset 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 Western Asset High 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 Western Asset i.e., Western Asset and MFS Investment go up and down completely randomly.
Pair Corralation between Western Asset and MFS Investment
Considering the 90-day investment horizon Western Asset High is expected to generate 1.28 times more return on investment than MFS Investment. However, Western Asset is 1.28 times more volatile than MFS Investment Grade. It trades about 0.12 of its potential returns per unit of risk. MFS Investment Grade is currently generating about 0.13 per unit of risk. If you would invest 422.00 in Western Asset High on October 21, 2024 and sell it today you would earn a total of 7.00 from holding Western Asset High or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset High vs. MFS Investment Grade
Performance |
| Timeline |
| Western Asset High |
| MFS Investment Grade |
Western Asset and MFS Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and MFS Investment
The main advantage of trading using opposite Western Asset and MFS Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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.| Western Asset vs. Western Asset High | Western Asset vs. Western Asset High | Western Asset vs. Blackrock Debt Strategies | Western Asset vs. Western Asset Diversified |
| MFS Investment vs. Eaton Vance National | MFS Investment vs. Nuveen California Select | MFS Investment vs. Federated Premier Municipal |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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