Correlation Between MFS Investment and Nuveen Mortgage

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

Diversification Opportunities for MFS Investment and Nuveen Mortgage

0.55

Correlation Coefficient

MFS Investment  Nuveen Mortgage

Very weak diversification

The 3 months correlation between MFS and Nuveen is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and Nuveen Mortgage Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Mortgage Oppo 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 Nuveen Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Mortgage Oppo has no effect on the direction of MFS Investment i.e., MFS Investment and Nuveen Mortgage go up and down completely randomly.

Pair Corralation between MFS Investment and Nuveen Mortgage

Considering the 90-day investment horizon MFS Investment is expected to generate 1.75 times less return on investment than Nuveen Mortgage. In addition to that, MFS Investment is 1.06 times more volatile than Nuveen Mortgage Opportunity. It trades about 0.05 of its total potential returns per unit of risk. Nuveen Mortgage Opportunity is currently generating about 0.09 per unit of volatility. If you would invest  1,359  in Nuveen Mortgage Opportunity on October 5, 2024 and sell it today you would earn a total of  463.50  from holding Nuveen Mortgage Opportunity or generate 34.11% 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.  Nuveen Mortgage Opportunity

MFS Investment Grade

Risk-Adjusted Performance

0 of 100

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.

Nuveen Mortgage Oppo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen Mortgage Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Nuveen Mortgage is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MFS Investment and Nuveen Mortgage

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

The idea behind MFS Investment Grade and Nuveen Mortgage Opportunity 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..