Correlation Between Mfs Utilities and Mfs Emerging
Can any of the company-specific risk be diversified away by investing in both Mfs Utilities and Mfs Emerging 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 Utilities and Mfs Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mfs Utilities Fund and Mfs Emerging Markets, you can compare the effects of market volatilities on Mfs Utilities and Mfs Emerging 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 Utilities with a short position of Mfs Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs Utilities and Mfs Emerging.
Diversification Opportunities for Mfs Utilities and Mfs Emerging
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MFS and Mfs is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Utilities Fund and Mfs Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Emerging Markets and Mfs Utilities 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 Utilities Fund are associated (or correlated) with Mfs Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Emerging Markets has no effect on the direction of Mfs Utilities i.e., Mfs Utilities and Mfs Emerging go up and down completely randomly.
Pair Corralation between Mfs Utilities and Mfs Emerging
Assuming the 90 days horizon Mfs Utilities Fund is expected to generate 3.4 times more return on investment than Mfs Emerging. However, Mfs Utilities is 3.4 times more volatile than Mfs Emerging Markets. It trades about 0.04 of its potential returns per unit of risk. Mfs Emerging Markets is currently generating about 0.08 per unit of risk. If you would invest 2,448 in Mfs Utilities Fund on August 29, 2024 and sell it today you would earn a total of 20.00 from holding Mfs Utilities Fund or generate 0.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mfs Utilities Fund vs. Mfs Emerging Markets
Performance |
| Timeline |
| Mfs Utilities |
| Mfs Emerging Markets |
Mfs Utilities and Mfs Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mfs Utilities and Mfs Emerging
The main advantage of trading using opposite Mfs Utilities and Mfs Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mfs Utilities position performs unexpectedly, Mfs Emerging 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 Emerging will offset losses from the drop in Mfs Emerging's long position.The idea behind Mfs Utilities Fund and Mfs Emerging Markets 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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