Correlation Between MFS Investment and Noah Holdings

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

Diversification Opportunities for MFS Investment and Noah Holdings

0.52

Correlation Coefficient

MFS Investment  Noah Holdings

Very weak diversification

The 3 months correlation between MFS and Noah is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and Noah Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Noah Holdings 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 Noah Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Noah Holdings has no effect on the direction of MFS Investment i.e., MFS Investment and Noah Holdings go up and down completely randomly.

Pair Corralation between MFS Investment and Noah Holdings

Considering the 90-day investment horizon MFS Investment Grade is expected to generate 0.22 times more return on investment than Noah Holdings. However, MFS Investment Grade is 4.56 times less risky than Noah Holdings. It trades about -0.01 of its potential returns per unit of risk. Noah Holdings is currently generating about -0.05 per unit of risk. If you would invest  816.00  in MFS Investment Grade on November 29, 2024 and sell it today you would lose (3.00) from holding MFS Investment Grade or give up 0.37% of portfolio value over 90 days.

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

MFS Investment Grade  vs.  Noah Holdings

MFS Investment Grade

Risk-Adjusted Performance

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.

Noah Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Noah Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with MFS Investment and Noah Holdings

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

The idea behind MFS Investment Grade and Noah Holdings 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.