Correlation Between Central Europe and MFS Intermediate

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

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

Diversification Opportunities for Central Europe and MFS Intermediate

0.64

Correlation Coefficient

Central Europe  MFS Intermediate

Poor diversification

The 3 months correlation between Central and MFS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Central Europe Russia 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 Central Europe 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 Central Europe Russia 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 Central Europe i.e., Central Europe and MFS Intermediate go up and down completely randomly.

Pair Corralation between Central Europe and MFS Intermediate

Considering the 90-day investment horizon Central Europe Russia is expected to generate 5.05 times more return on investment than MFS Intermediate. However, Central Europe is 5.05 times more volatile than MFS Intermediate Income. It trades about 0.17 of its potential returns per unit of risk. MFS Intermediate Income is currently generating about 0.08 per unit of risk. If you would invest  1,130  in Central Europe Russia on December 26, 2024 and sell it today you would earn a total of  365.00  from holding Central Europe Russia or generate 32.3% return on investment over 90 days.

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

Central Europe Russia  vs.  MFS Intermediate Income

Central Europe Russia

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Central Europe Russia are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather fragile technical and fundamental indicators, Central Europe exhibited solid returns over the last few months and may actually be approaching a breakup point.

MFS Intermediate Income

Risk-Adjusted Performance

Insignificant

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 Central Europe and MFS Intermediate

The main advantage of trading using opposite Central Europe and MFS Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Europe 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 Central Europe Russia 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.