Correlation Between CBH and MFS Intermediate

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

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

Diversification Opportunities for CBH and MFS Intermediate

-0.33

Correlation Coefficient

CBH  MFS Intermediate

Very good diversification

The 3 months correlation between CBH and MFS is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding CBH and MFS Intermediate Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Intermediate Income and CBH 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 CBH are associated (or correlated) with MFS Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Intermediate Income has no effect on the direction of CBH i.e., CBH and MFS Intermediate go up and down completely randomly.

Pair Corralation between CBH and MFS Intermediate

Considering the 90-day investment horizon CBH is expected to generate 1.12 times less return on investment than MFS Intermediate. But when comparing it to its historical volatility, CBH is 4.19 times less risky than MFS Intermediate. It trades about 0.34 of its potential returns per unit of risk. MFS Intermediate Income is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  255.00  in MFS Intermediate Income on September 12, 2024 and sell it today you would earn a total of  17.00  from holding MFS Intermediate Income or generate 6.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	44.35%
Values	Daily Returns

CBH  vs.  MFS Intermediate Income

CBH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CBH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, CBH is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

MFS Intermediate Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS Intermediate Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, MFS Intermediate is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CBH and MFS Intermediate

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

The idea behind CBH and MFS Intermediate 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 CEOs Directory module to screen CEOs from public companies around the world.