Correlation Between International Growth and Mfs International
Can any of the company-specific risk be diversified away by investing in both International Growth and Mfs International 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 International Growth and Mfs International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Growth Fund and Mfs International New, you can compare the effects of market volatilities on International Growth and Mfs International 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 International Growth with a short position of Mfs International. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Growth and Mfs International.
Diversification Opportunities for International Growth and Mfs International
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between International and Mfs is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding International Growth Fund and Mfs International New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs International New and International Growth 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 International Growth Fund are associated (or correlated) with Mfs International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs International New has no effect on the direction of International Growth i.e., International Growth and Mfs International go up and down completely randomly.
Pair Corralation between International Growth and Mfs International
Assuming the 90 days horizon International Growth is expected to generate 1.19 times less return on investment than Mfs International. In addition to that, International Growth is 1.29 times more volatile than Mfs International New. It trades about 0.02 of its total potential returns per unit of risk. Mfs International New is currently generating about 0.03 per unit of volatility. If you would invest 3,077 in Mfs International New on September 2, 2024 and sell it today you would earn a total of 244.00 from holding Mfs International New or generate 7.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Growth Fund vs. Mfs International New
Performance |
| Timeline |
| International Growth |
| Mfs International New |
International Growth and Mfs International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Growth and Mfs International
The main advantage of trading using opposite International Growth and Mfs International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Growth position performs unexpectedly, Mfs International 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 International will offset losses from the drop in Mfs International's long position.The idea behind International Growth Fund and Mfs International New 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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