Correlation Between Mfs Corporate and Investment Grade
Can any of the company-specific risk be diversified away by investing in both Mfs Corporate and Investment Grade 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 Mfs Corporate and Investment Grade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mfs Porate Bond and Investment Grade Porate, you can compare the effects of market volatilities on Mfs Corporate and Investment Grade 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 Mfs Corporate with a short position of Investment Grade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs Corporate and Investment Grade.
Diversification Opportunities for Mfs Corporate and Investment Grade
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Mfs and Investment is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Porate Bond and Investment Grade Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Grade Porate and Mfs Corporate 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 Mfs Porate Bond are associated (or correlated) with Investment Grade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Grade Porate has no effect on the direction of Mfs Corporate i.e., Mfs Corporate and Investment Grade go up and down completely randomly.
Pair Corralation between Mfs Corporate and Investment Grade
Assuming the 90 days horizon Mfs Corporate is expected to generate 1.03 times less return on investment than Investment Grade. But when comparing it to its historical volatility, Mfs Porate Bond is 1.0 times less risky than Investment Grade. It trades about 0.05 of its potential returns per unit of risk. Investment Grade Porate is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 820.00 in Investment Grade Porate on September 3, 2024 and sell it today you would earn a total of 88.00 from holding Investment Grade Porate or generate 10.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mfs Porate Bond vs. Investment Grade Porate
Performance |
| Timeline |
| Mfs Porate Bond |
| Investment Grade Porate |
Mfs Corporate and Investment Grade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mfs Corporate and Investment Grade
The main advantage of trading using opposite Mfs Corporate and Investment Grade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mfs Corporate position performs unexpectedly, Investment Grade 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 Investment Grade will offset losses from the drop in Investment Grade's long position.The idea behind Mfs Porate Bond and Investment Grade Porate 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.
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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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