Correlation Between MFS High and Gabelli Equity

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

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

Diversification Opportunities for MFS High and Gabelli Equity

0.83

Correlation Coefficient

MFS High  Gabelli Equity

Very poor diversification

The 3 months correlation between MFS and Gabelli is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding MFS High Income and The Gabelli Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity and MFS High 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 High Income are associated (or correlated) with Gabelli Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Equity has no effect on the direction of MFS High i.e., MFS High and Gabelli Equity go up and down completely randomly.

Pair Corralation between MFS High and Gabelli Equity

Considering the 90-day investment horizon MFS High Income is expected to generate 0.85 times more return on investment than Gabelli Equity. However, MFS High Income is 1.18 times less risky than Gabelli Equity. It trades about -0.22 of its potential returns per unit of risk. The Gabelli Equity is currently generating about -0.22 per unit of risk. If you would invest  383.00  in MFS High Income on October 7, 2024 and sell it today you would lose (12.00) from holding MFS High Income or give up 3.13% of portfolio value over 90 days.

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

MFS High Income  vs.  The Gabelli Equity

MFS High Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS High Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, MFS High is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Gabelli Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Equity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Preferred Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with MFS High and Gabelli Equity

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

The idea behind MFS High Income and The Gabelli Equity 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.