Correlation Between MFS Investment and SPDR Bloomberg

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

Diversification Opportunities for MFS Investment and SPDR Bloomberg

0.61

Correlation Coefficient

MFS Investment  SPDR Bloomberg

Poor diversification

The 3 months correlation between MFS and SPDR is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and SPDR Bloomberg High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg 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 SPDR Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Bloomberg High has no effect on the direction of MFS Investment i.e., MFS Investment and SPDR Bloomberg go up and down completely randomly.

Pair Corralation between MFS Investment and SPDR Bloomberg

Considering the 90-day investment horizon MFS Investment Grade is expected to generate 1.78 times more return on investment than SPDR Bloomberg. However, MFS Investment is 1.78 times more volatile than SPDR Bloomberg High. It trades about 0.07 of its potential returns per unit of risk. SPDR Bloomberg High is currently generating about 0.1 per unit of risk. If you would invest  661.00  in MFS Investment Grade on September 13, 2024 and sell it today you would earn a total of  169.00  from holding MFS Investment Grade or generate 25.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

MFS Investment Grade  vs.  SPDR Bloomberg High

MFS Investment Grade

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Investment Grade are ranked lower than 4 (%) 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.

SPDR Bloomberg High

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg High are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR Bloomberg is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with MFS Investment and SPDR Bloomberg

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

The idea behind MFS Investment Grade and SPDR Bloomberg High 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..