Correlation Between Aberdeen Global and MFS Municipal

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

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

Diversification Opportunities for Aberdeen Global and MFS Municipal

-0.28

Correlation Coefficient

Aberdeen Global  MFS Municipal

Very good diversification

The 3 months correlation between Aberdeen and MFS is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Global IF and MFS Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Municipal Income and Aberdeen Global 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 Aberdeen Global IF are associated (or correlated) with MFS Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Municipal Income has no effect on the direction of Aberdeen Global i.e., Aberdeen Global and MFS Municipal go up and down completely randomly.

Pair Corralation between Aberdeen Global and MFS Municipal

Considering the 90-day investment horizon Aberdeen Global IF is expected to generate 1.27 times more return on investment than MFS Municipal. However, Aberdeen Global is 1.27 times more volatile than MFS Municipal Income. It trades about -0.01 of its potential returns per unit of risk. MFS Municipal Income is currently generating about -0.16 per unit of risk. If you would invest  593.00  in Aberdeen Global IF on September 19, 2024 and sell it today you would lose (1.00) from holding Aberdeen Global IF or give up 0.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Aberdeen Global IF  vs.  MFS Municipal Income

Aberdeen Global IF

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Global IF are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Aberdeen Global is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

MFS Municipal Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS Municipal Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, MFS Municipal is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aberdeen Global and MFS Municipal

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

The idea behind Aberdeen Global IF and MFS Municipal Income 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.