Correlation Between MFS Investment and Gabelli MultiMedia

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

Diversification Opportunities for MFS Investment and Gabelli MultiMedia

0.49

Correlation Coefficient

MFS Investment  Gabelli MultiMedia

Very weak diversification

The 3 months correlation between MFS and Gabelli is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and Gabelli MultiMedia Mutual in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli MultiMedia Mutual 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 Gabelli MultiMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli MultiMedia Mutual has no effect on the direction of MFS Investment i.e., MFS Investment and Gabelli MultiMedia go up and down completely randomly.

Pair Corralation between MFS Investment and Gabelli MultiMedia

Considering the 90-day investment horizon MFS Investment is expected to generate 2.11 times less return on investment than Gabelli MultiMedia. But when comparing it to its historical volatility, MFS Investment Grade is 1.81 times less risky than Gabelli MultiMedia. It trades about 0.08 of its potential returns per unit of risk. Gabelli MultiMedia Mutual is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  483.00  in Gabelli MultiMedia Mutual on September 4, 2024 and sell it today you would earn a total of  24.00  from holding Gabelli MultiMedia Mutual or generate 4.97% return on investment over 90 days.

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

MFS Investment Grade  vs.  Gabelli MultiMedia Mutual

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.

Gabelli MultiMedia Mutual

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli MultiMedia Mutual are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Gabelli MultiMedia is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MFS Investment and Gabelli MultiMedia

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

The idea behind MFS Investment Grade and Gabelli MultiMedia Mutual 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.