Correlation Between MFS Investment and GCM Grosvenor

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

Diversification Opportunities for MFS Investment and GCM Grosvenor

0.11

Correlation Coefficient

MFS Investment  GCM Grosvenor

Average diversification

The 3 months correlation between MFS and GCM is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and GCM Grosvenor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCM Grosvenor 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 GCM Grosvenor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GCM Grosvenor has no effect on the direction of MFS Investment i.e., MFS Investment and GCM Grosvenor go up and down completely randomly.

Pair Corralation between MFS Investment and GCM Grosvenor

Considering the 90-day investment horizon MFS Investment is expected to generate 1.52 times less return on investment than GCM Grosvenor. But when comparing it to its historical volatility, MFS Investment Grade is 2.58 times less risky than GCM Grosvenor. It trades about 0.17 of its potential returns per unit of risk. GCM Grosvenor is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,353  in GCM Grosvenor on November 29, 2024 and sell it today you would earn a total of  37.00  from holding GCM Grosvenor or generate 2.73% 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.  GCM Grosvenor

MFS Investment Grade

Risk-Adjusted Performance

Very 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.

GCM Grosvenor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GCM Grosvenor are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, GCM Grosvenor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MFS Investment and GCM Grosvenor

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

The idea behind MFS Investment Grade and GCM Grosvenor 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.