Correlation Between Mfs New and Mfs Mid
Can any of the company-specific risk be diversified away by investing in both Mfs New and Mfs Mid 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 New and Mfs Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mfs New Discovery and Mfs Mid Cap, you can compare the effects of market volatilities on Mfs New and Mfs Mid 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 New with a short position of Mfs Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs New and Mfs Mid.
Diversification Opportunities for Mfs New and Mfs Mid
Very poor diversification
The 3 months correlation between Mfs and Mfs is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Mfs New Discovery and Mfs Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Mid Cap and Mfs New 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 New Discovery are associated (or correlated) with Mfs Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Mid Cap has no effect on the direction of Mfs New i.e., Mfs New and Mfs Mid go up and down completely randomly.
Pair Corralation between Mfs New and Mfs Mid
Assuming the 90 days horizon Mfs New Discovery is expected to generate 0.98 times more return on investment than Mfs Mid. However, Mfs New Discovery is 1.02 times less risky than Mfs Mid. It trades about 0.25 of its potential returns per unit of risk. Mfs Mid Cap is currently generating about 0.19 per unit of risk. If you would invest 2,200 in Mfs New Discovery on October 25, 2024 and sell it today you would earn a total of 101.00 from holding Mfs New Discovery or generate 4.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
Mfs New Discovery vs. Mfs Mid Cap
Performance |
| Timeline |
| Mfs New Discovery |
| Mfs Mid Cap |
Mfs New and Mfs Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mfs New and Mfs Mid
The main advantage of trading using opposite Mfs New and Mfs Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mfs New position performs unexpectedly, Mfs Mid 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 Mid will offset losses from the drop in Mfs Mid's long position.| Mfs New vs. Mfs Prudent Investor | Mfs New vs. Mfs Prudent Investor | Mfs New vs. Mfs Prudent Investor | Mfs New vs. Mfs Prudent Investor |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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