Correlation Between MFS Investment and Abrdn Emerging

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

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

Diversification Opportunities for MFS Investment and Abrdn Emerging

0.16

Correlation Coefficient

MFS Investment  Abrdn Emerging

Average diversification

The 3 months correlation between MFS and Abrdn is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and Abrdn Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abrdn Emerging Markets and MFS Investment 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 Investment Grade are associated (or correlated) with Abrdn Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abrdn Emerging Markets has no effect on the direction of MFS Investment i.e., MFS Investment and Abrdn Emerging go up and down completely randomly.

Pair Corralation between MFS Investment and Abrdn Emerging

Considering the 90-day investment horizon MFS Investment is expected to generate 1.08 times less return on investment than Abrdn Emerging. But when comparing it to its historical volatility, MFS Investment Grade is 2.67 times less risky than Abrdn Emerging. It trades about 0.08 of its potential returns per unit of risk. Abrdn Emerging Markets is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  514.00  in Abrdn Emerging Markets on September 5, 2024 and sell it today you would earn a total of  11.00  from holding Abrdn Emerging Markets or generate 2.14% return on investment over 90 days.

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

MFS Investment Grade  vs.  Abrdn Emerging Markets

MFS Investment Grade

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Investment Grade are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, MFS Investment is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Abrdn Emerging Markets

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with MFS Investment and Abrdn Emerging

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

The idea behind MFS Investment Grade and Abrdn Emerging Markets 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.