Correlation Between Mfs International and Jpmorgan Income
Can any of the company-specific risk be diversified away by investing in both Mfs International and Jpmorgan Income 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 International and Jpmorgan Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mfs International Value and Jpmorgan Income Builder, you can compare the effects of market volatilities on Mfs International and Jpmorgan Income 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 International with a short position of Jpmorgan Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs International and Jpmorgan Income.
Diversification Opportunities for Mfs International and Jpmorgan Income
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mfs and Jpmorgan is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Mfs International Value and Jpmorgan Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Income Builder and Mfs International 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 International Value are associated (or correlated) with Jpmorgan Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Income Builder has no effect on the direction of Mfs International i.e., Mfs International and Jpmorgan Income go up and down completely randomly.
Pair Corralation between Mfs International and Jpmorgan Income
Assuming the 90 days horizon Mfs International is expected to generate 1.04 times less return on investment than Jpmorgan Income. In addition to that, Mfs International is 1.88 times more volatile than Jpmorgan Income Builder. It trades about 0.05 of its total potential returns per unit of risk. Jpmorgan Income Builder is currently generating about 0.09 per unit of volatility. If you would invest 882.00 in Jpmorgan Income Builder on August 25, 2024 and sell it today you would earn a total of 121.00 from holding Jpmorgan Income Builder or generate 13.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mfs International Value vs. Jpmorgan Income Builder
Performance |
| Timeline |
| Mfs International Value |
| Jpmorgan Income Builder |
Mfs International and Jpmorgan Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mfs International and Jpmorgan Income
The main advantage of trading using opposite Mfs International and Jpmorgan Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mfs International position performs unexpectedly, Jpmorgan Income 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 Jpmorgan Income will offset losses from the drop in Jpmorgan Income's long position.The idea behind Mfs International Value and Jpmorgan Income Builder 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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