Correlation Between MFS Investment and Guardian Capital

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

Diversification Opportunities for MFS Investment and Guardian Capital

0.23

Correlation Coefficient

MFS Investment  Guardian Capital

Modest diversification

The 3 months correlation between MFS and Guardian is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and Guardian Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Capital 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 Guardian Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Capital has no effect on the direction of MFS Investment i.e., MFS Investment and Guardian Capital go up and down completely randomly.

Pair Corralation between MFS Investment and Guardian Capital

Considering the 90-day investment horizon MFS Investment Grade is expected to generate 0.41 times more return on investment than Guardian Capital. However, MFS Investment Grade is 2.42 times less risky than Guardian Capital. It trades about 0.01 of its potential returns per unit of risk. Guardian Capital Group is currently generating about -0.06 per unit of risk. If you would invest  785.00  in MFS Investment Grade on December 28, 2024 and sell it today you would earn a total of  1.00  from holding MFS Investment Grade or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.52%
Values	Daily Returns

MFS Investment Grade  vs.  Guardian Capital Group

MFS Investment Grade

Risk-Adjusted Performance

Weak

Over the last 90 days MFS Investment Grade has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Guardian Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guardian Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Guardian Capital 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 Guardian Capital

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

The idea behind MFS Investment Grade and Guardian Capital Group 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.