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

0.59

Correlation Coefficient

Mfs Intermediate  Western Asset

Very weak diversification

The 3 months correlation between Mfs and Western is 0.59. 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 High is expected to generate 0.82 times more return on investment than Western Asset. However, Mfs Intermediate High is 1.22 times less risky than Western Asset. It trades about 0.06 of its potential returns per unit of risk. Western Asset High is currently generating about 0.03 per unit of risk. If you would invest  139.00  in Mfs Intermediate High on September 20, 2024 and sell it today you would earn a total of  34.00  from holding Mfs Intermediate High or generate 24.46% return on investment over 90 days.

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

Mfs Intermediate High  vs.  Western Asset High

Mfs Intermediate High

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Intermediate High are ranked lower than 1 (%) 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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Western Asset High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Western Asset is not utilizing all of its potentials. The recent stock price disturbance, 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.