Correlation Between Mfs Technology and American Balanced
Can any of the company-specific risk be diversified away by investing in both Mfs Technology and American Balanced 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 Technology and American Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mfs Technology Fund and American Balanced Fund, you can compare the effects of market volatilities on Mfs Technology and American Balanced 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 Technology with a short position of American Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs Technology and American Balanced.
Diversification Opportunities for Mfs Technology and American Balanced
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mfs and American is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Technology Fund and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced and Mfs Technology 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 Technology Fund are associated (or correlated) with American Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Balanced has no effect on the direction of Mfs Technology i.e., Mfs Technology and American Balanced go up and down completely randomly.
Pair Corralation between Mfs Technology and American Balanced
Assuming the 90 days horizon Mfs Technology Fund is expected to generate 2.41 times more return on investment than American Balanced. However, Mfs Technology is 2.41 times more volatile than American Balanced Fund. It trades about 0.11 of its potential returns per unit of risk. American Balanced Fund is currently generating about 0.07 per unit of risk. If you would invest 4,942 in Mfs Technology Fund on August 29, 2024 and sell it today you would earn a total of 257.00 from holding Mfs Technology Fund or generate 5.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mfs Technology Fund vs. American Balanced Fund
Performance |
| Timeline |
| Mfs Technology |
| American Balanced |
Mfs Technology and American Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mfs Technology and American Balanced
The main advantage of trading using opposite Mfs Technology and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mfs Technology position performs unexpectedly, American Balanced 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 American Balanced will offset losses from the drop in American Balanced's long position.| Mfs Technology vs. Red Oak Technology | Mfs Technology vs. Live Oak Health | Mfs Technology vs. HUMANA INC | Mfs Technology vs. Aquagold International |
| American Balanced vs. Mfs Technology Fund | American Balanced vs. Technology Ultrasector Profund | American Balanced vs. Goldman Sachs Technology | American Balanced vs. Dreyfus Technology Growth |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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