Correlation Between Ab Equity and Mfs International

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

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

Diversification Opportunities for Ab Equity and Mfs International

0.46

Correlation Coefficient

Ab Equity  Mfs International

Very weak diversification

The 3 months correlation between AUIAX and Mfs is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ab Equity Income 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 Ab Equity 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 Ab Equity Income 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 Ab Equity i.e., Ab Equity and Mfs International go up and down completely randomly.

Pair Corralation between Ab Equity and Mfs International

Assuming the 90 days horizon Ab Equity is expected to generate 13.84 times less return on investment than Mfs International. In addition to that, Ab Equity is 1.28 times more volatile than Mfs International New. It trades about 0.01 of its total potential returns per unit of risk. Mfs International New is currently generating about 0.13 per unit of volatility. If you would invest  2,750  in Mfs International New on December 19, 2024 and sell it today you would earn a total of  139.00  from holding Mfs International New or generate 5.05% return on investment over 90 days.

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

Ab Equity Income  vs.  Mfs International New

Ab Equity Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ab Equity Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ab Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs International New

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs International New are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mfs International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ab Equity and Mfs International

The main advantage of trading using opposite Ab Equity and Mfs International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Equity 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 Ab Equity Income 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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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.