Correlation Between Mid Cap and Mfs Mid

Can any of the company-specific risk be diversified away by investing in both Mid Cap 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 Mid Cap and Mfs Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mid Cap Value and Mfs Mid Cap, you can compare the effects of market volatilities on Mid Cap 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 Mid Cap with a short position of Mfs Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Mfs Mid.

Diversification Opportunities for Mid Cap and Mfs Mid

0.84

Correlation Coefficient

Mid Cap  Mfs Mid

Very poor diversification

The 3 months correlation between Mid and Mfs is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value 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 Mid Cap 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 Mid Cap Value 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 Mid Cap i.e., Mid Cap and Mfs Mid go up and down completely randomly.

Pair Corralation between Mid Cap and Mfs Mid

Assuming the 90 days horizon Mid Cap Value is expected to generate 0.59 times more return on investment than Mfs Mid. However, Mid Cap Value is 1.71 times less risky than Mfs Mid. It trades about 0.16 of its potential returns per unit of risk. Mfs Mid Cap is currently generating about 0.01 per unit of risk. If you would invest  1,548  in Mid Cap Value on December 2, 2024 and sell it today you would earn a total of  66.00  from holding Mid Cap Value or generate 4.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Mid Cap Value  vs.  Mfs Mid Cap

Mid Cap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Mfs Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mfs Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Mid Cap and Mfs Mid

The main advantage of trading using opposite Mid Cap and Mfs Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap 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.

The idea behind Mid Cap Value and Mfs Mid Cap 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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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.