Correlation Between MFS Investment and Munivest Fund

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

Diversification Opportunities for MFS Investment and Munivest Fund

0.84

Correlation Coefficient

MFS Investment  Munivest Fund

Very poor diversification

The 3 months correlation between MFS and Munivest is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and Munivest Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Munivest Fund 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 Munivest Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Munivest Fund has no effect on the direction of MFS Investment i.e., MFS Investment and Munivest Fund go up and down completely randomly.

Pair Corralation between MFS Investment and Munivest Fund

Considering the 90-day investment horizon MFS Investment is expected to generate 4.47 times less return on investment than Munivest Fund. But when comparing it to its historical volatility, MFS Investment Grade is 1.43 times less risky than Munivest Fund. It trades about 0.01 of its potential returns per unit of risk. Munivest Fund is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  693.00  in Munivest Fund on December 27, 2024 and sell it today you would earn a total of  9.00  from holding Munivest Fund or generate 1.3% return on investment over 90 days.

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

MFS Investment Grade  vs.  Munivest Fund

MFS Investment Grade

Risk-Adjusted Performance

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.

Munivest Fund

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Munivest Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, Munivest Fund is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MFS Investment and Munivest Fund

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

The idea behind MFS Investment Grade and Munivest Fund 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.