Correlation Between Ares Dynamic and MFS High

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

By analyzing existing cross correlation between Ares Dynamic Credit and MFS High Income, you can compare the effects of market volatilities on Ares Dynamic and MFS High 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 Ares Dynamic with a short position of MFS High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Dynamic and MFS High.

Diversification Opportunities for Ares Dynamic and MFS High

0.07

Correlation Coefficient

Ares Dynamic  MFS High

Significant diversification

The 3 months correlation between Ares and MFS is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Ares Dynamic Credit and MFS High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS High Income and Ares Dynamic 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 Ares Dynamic Credit are associated (or correlated) with MFS High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS High Income has no effect on the direction of Ares Dynamic i.e., Ares Dynamic and MFS High go up and down completely randomly.

Pair Corralation between Ares Dynamic and MFS High

Given the investment horizon of 90 days Ares Dynamic Credit is expected to generate 0.77 times more return on investment than MFS High. However, Ares Dynamic Credit is 1.31 times less risky than MFS High. It trades about -0.18 of its potential returns per unit of risk. MFS High Income is currently generating about -0.17 per unit of risk. If you would invest  1,527  in Ares Dynamic Credit on September 23, 2024 and sell it today you would lose (33.00) from holding Ares Dynamic Credit or give up 2.16% of portfolio value over 90 days.

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

Ares Dynamic Credit  vs.  MFS High Income

Ares Dynamic Credit

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Dynamic Credit are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound fundamental indicators, Ares Dynamic is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

MFS High Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS High Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, MFS High is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ares Dynamic and MFS High

The main advantage of trading using opposite Ares Dynamic and MFS High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Dynamic position performs unexpectedly, MFS High 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 High will offset losses from the drop in MFS High's long position.

The idea behind Ares Dynamic Credit and MFS High Income 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.