Correlation Between MFS Investment and Nuveen California

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

Diversification Opportunities for MFS Investment and Nuveen California

0.55

Correlation Coefficient

MFS Investment  Nuveen California

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 California Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen California Select 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 California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen California Select has no effect on the direction of MFS Investment i.e., MFS Investment and Nuveen California go up and down completely randomly.

Pair Corralation between MFS Investment and Nuveen California

Considering the 90-day investment horizon MFS Investment Grade is expected to generate 0.98 times more return on investment than Nuveen California. However, MFS Investment Grade is 1.02 times less risky than Nuveen California. It trades about 0.0 of its potential returns per unit of risk. Nuveen California Select is currently generating about -0.02 per unit of risk. If you would invest  792.00  in MFS Investment Grade on December 27, 2024 and sell it today you would lose (1.00) from holding MFS Investment Grade or give up 0.13% 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.  Nuveen California Select

MFS Investment Grade

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Investment Grade are ranked lower than 2 (%) 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.

Nuveen California Select

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen California Select are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Nuveen California is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MFS Investment and Nuveen California

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

The idea behind MFS Investment Grade and Nuveen California Select 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.