Correlation Between MFS Investment and Invesco Fundamental

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

Diversification Opportunities for MFS Investment and Invesco Fundamental

0.72

Correlation Coefficient

MFS Investment  Invesco Fundamental

Poor diversification

The 3 months correlation between MFS and Invesco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and Invesco Fundamental High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Fundamental 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 Invesco Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Fundamental High has no effect on the direction of MFS Investment i.e., MFS Investment and Invesco Fundamental go up and down completely randomly.

Pair Corralation between MFS Investment and Invesco Fundamental

Considering the 90-day investment horizon MFS Investment Grade is expected to under-perform the Invesco Fundamental. In addition to that, MFS Investment is 2.31 times more volatile than Invesco Fundamental High. It trades about -0.01 of its total potential returns per unit of risk. Invesco Fundamental High is currently generating about 0.01 per unit of volatility. If you would invest  1,829  in Invesco Fundamental High on September 15, 2024 and sell it today you would earn a total of  2.00  from holding Invesco Fundamental High or generate 0.11% return on investment over 90 days.

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

MFS Investment Grade  vs.  Invesco Fundamental High

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 latest stock price confusion, may contribute to short-horizon losses for the traders.

Invesco Fundamental High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Fundamental High has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, Invesco Fundamental is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with MFS Investment and Invesco Fundamental

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

The idea behind MFS Investment Grade and Invesco Fundamental 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.