Correlation Between MFS Investment and IShares Edge
Can any of the company-specific risk be diversified away by investing in both MFS Investment and IShares Edge 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 IShares Edge 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 iShares Edge High, you can compare the effects of market volatilities on MFS Investment and IShares Edge 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 IShares Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS Investment and IShares Edge.
Diversification Opportunities for MFS Investment and IShares Edge
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MFS and IShares is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and iShares Edge High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge High 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 IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge High has no effect on the direction of MFS Investment i.e., MFS Investment and IShares Edge go up and down completely randomly.
Pair Corralation between MFS Investment and IShares Edge
Considering the 90-day investment horizon MFS Investment is expected to generate 2.07 times less return on investment than IShares Edge. In addition to that, MFS Investment is 1.9 times more volatile than iShares Edge High. It trades about 0.03 of its total potential returns per unit of risk. iShares Edge High is currently generating about 0.11 per unit of volatility. If you would invest 4,641 in iShares Edge High on December 27, 2024 and sell it today you would earn a total of 80.00 from holding iShares Edge High or generate 1.72% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
MFS Investment Grade vs. iShares Edge High
Performance |
Timeline |
MFS Investment Grade |
iShares Edge High |
MFS Investment and IShares Edge Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MFS Investment and IShares Edge
The main advantage of trading using opposite MFS Investment and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFS Investment position performs unexpectedly, IShares Edge 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 IShares Edge will offset losses from the drop in IShares Edge's long position.MFS Investment vs. Eaton Vance National | MFS Investment vs. Nuveen California Select | MFS Investment vs. Federated Premier Municipal |
IShares Edge vs. iShares Edge Investment | IShares Edge vs. iShares Interest Rate | IShares Edge vs. iShares Fallen Angels | IShares Edge vs. iShares Intl High |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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