Correlation Between Government Securities and Mfs Global
Can any of the company-specific risk be diversified away by investing in both Government Securities and Mfs Global 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 Government Securities and Mfs Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Government Securities Fund and Mfs Global Alternative, you can compare the effects of market volatilities on Government Securities and Mfs Global 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 Government Securities with a short position of Mfs Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Government Securities and Mfs Global.
Diversification Opportunities for Government Securities and Mfs Global
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Government and Mfs is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Government Securities Fund and Mfs Global Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Global Alternative and Government Securities 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 Government Securities Fund are associated (or correlated) with Mfs Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Global Alternative has no effect on the direction of Government Securities i.e., Government Securities and Mfs Global go up and down completely randomly.
Pair Corralation between Government Securities and Mfs Global
Assuming the 90 days horizon Government Securities Fund is expected to generate 1.21 times more return on investment than Mfs Global. However, Government Securities is 1.21 times more volatile than Mfs Global Alternative. It trades about 0.05 of its potential returns per unit of risk. Mfs Global Alternative is currently generating about 0.03 per unit of risk. If you would invest 878.00 in Government Securities Fund on August 29, 2024 and sell it today you would earn a total of 3.00 from holding Government Securities Fund or generate 0.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Government Securities Fund vs. Mfs Global Alternative
Performance |
| Timeline |
| Government Securities |
| Mfs Global Alternative |
Government Securities and Mfs Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Government Securities and Mfs Global
The main advantage of trading using opposite Government Securities and Mfs Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Government Securities position performs unexpectedly, Mfs Global 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 Global will offset losses from the drop in Mfs Global's long position.The idea behind Government Securities Fund and Mfs Global Alternative 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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