Correlation Between Mfs Intermediate and Western Asset

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

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

Diversification Opportunities for Mfs Intermediate and Western Asset

0.12

Correlation Coefficient

Mfs Intermediate  Western Asset

Average diversification

The 3 months correlation between Mfs and Western is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Intermediate High and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and Mfs Intermediate 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 Mfs Intermediate High are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of Mfs Intermediate i.e., Mfs Intermediate and Western Asset go up and down completely randomly.

Pair Corralation between Mfs Intermediate and Western Asset

Considering the 90-day investment horizon Mfs Intermediate is expected to generate 3.77 times less return on investment than Western Asset. In addition to that, Mfs Intermediate is 1.12 times more volatile than Western Asset High. It trades about 0.04 of its total potential returns per unit of risk. Western Asset High is currently generating about 0.15 per unit of volatility. If you would invest  383.00  in Western Asset High on December 27, 2024 and sell it today you would earn a total of  19.00  from holding Western Asset High or generate 4.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Mfs Intermediate High  vs.  Western Asset High

Mfs Intermediate High

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Intermediate High are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable forward indicators, Mfs Intermediate is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Western Asset High

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy forward indicators, Western Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Mfs Intermediate and Western Asset

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

The idea behind Mfs Intermediate High and Western Asset High 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.