Correlation Between Eaton Vance and MFS Investment

Can any of the company-specific risk be diversified away by investing in both Eaton Vance and MFS Investment 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 Eaton Vance and MFS Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eaton Vance Municipal and MFS Investment Grade, you can compare the effects of market volatilities on Eaton Vance and MFS Investment 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 Eaton Vance with a short position of MFS Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Vance and MFS Investment.

Diversification Opportunities for Eaton Vance and MFS Investment

0.16

Correlation Coefficient

Eaton Vance  MFS Investment

Average diversification

The 3 months correlation between Eaton and MFS is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Municipal and MFS Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Investment Grade and Eaton Vance 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 Eaton Vance Municipal are associated (or correlated) with MFS Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Investment Grade has no effect on the direction of Eaton Vance i.e., Eaton Vance and MFS Investment go up and down completely randomly.

Pair Corralation between Eaton Vance and MFS Investment

Considering the 90-day investment horizon Eaton Vance is expected to generate 5.42 times less return on investment than MFS Investment. But when comparing it to its historical volatility, Eaton Vance Municipal is 1.16 times less risky than MFS Investment. It trades about 0.04 of its potential returns per unit of risk. MFS Investment Grade is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  735.00  in MFS Investment Grade on August 31, 2024 and sell it today you would earn a total of  86.00  from holding MFS Investment Grade or generate 11.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Eaton Vance Municipal  vs.  MFS Investment Grade

Eaton Vance Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaton Vance Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Eaton Vance is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

MFS Investment Grade

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Investment Grade are ranked lower than 6 (%) 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.

Pair Trading with Eaton Vance and MFS Investment

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

The idea behind Eaton Vance Municipal and MFS Investment Grade 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.