Correlation Between MFS Investment and American Business

Can any of the company-specific risk be diversified away by investing in both MFS Investment and American Business 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 American Business 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 American Business Bk, you can compare the effects of market volatilities on MFS Investment and American Business 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 American Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS Investment and American Business.

Diversification Opportunities for MFS Investment and American Business

-0.03

Correlation Coefficient

MFS Investment  American Business

Good diversification

The 3 months correlation between MFS and American is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and American Business Bk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Business 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 American Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Business has no effect on the direction of MFS Investment i.e., MFS Investment and American Business go up and down completely randomly.

Pair Corralation between MFS Investment and American Business

Considering the 90-day investment horizon MFS Investment is expected to generate 8.95 times less return on investment than American Business. But when comparing it to its historical volatility, MFS Investment Grade is 2.2 times less risky than American Business. It trades about 0.08 of its potential returns per unit of risk. American Business Bk is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  3,640  in American Business Bk on August 30, 2024 and sell it today you would earn a total of  810.00  from holding American Business Bk or generate 22.25% return on investment over 90 days.

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

MFS Investment Grade  vs.  American Business Bk

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.

American Business

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Business Bk are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, American Business showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MFS Investment and American Business

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

The idea behind MFS Investment Grade and American Business Bk 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.