Correlation Between Mfs International and Short Term
Can any of the company-specific risk be diversified away by investing in both Mfs International and Short Term 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 Short Term 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 Short Term Government Fund, you can compare the effects of market volatilities on Mfs International and Short Term 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 Short Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs International and Short Term.
Diversification Opportunities for Mfs International and Short Term
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Mfs and Short is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Mfs International Value and Short Term Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Government 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 Short Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Government has no effect on the direction of Mfs International i.e., Mfs International and Short Term go up and down completely randomly.
Pair Corralation between Mfs International and Short Term
Assuming the 90 days horizon Mfs International Value is expected to generate 9.1 times more return on investment than Short Term. However, Mfs International is 9.1 times more volatile than Short Term Government Fund. It trades about 0.26 of its potential returns per unit of risk. Short Term Government Fund is currently generating about 0.12 per unit of risk. If you would invest 3,627 in Mfs International Value on November 9, 2024 and sell it today you would earn a total of 166.00 from holding Mfs International Value or generate 4.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mfs International Value vs. Short Term Government Fund
Performance |
| Timeline |
| Mfs International Value |
| Short Term Government |
Mfs International and Short Term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mfs International and Short Term
The main advantage of trading using opposite Mfs International and Short Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mfs International position performs unexpectedly, Short Term 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 Short Term will offset losses from the drop in Short Term's long position.The idea behind Mfs International Value and Short Term Government 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.
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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