Correlation Between Mfs Prudent and Mfs High

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

By analyzing existing cross correlation between Mfs Prudent Investor and Mfs High Income, you can compare the effects of market volatilities on Mfs Prudent and Mfs High 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 Prudent with a short position of Mfs High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs Prudent and Mfs High.

Diversification Opportunities for Mfs Prudent and Mfs High

0.84

Correlation Coefficient

Mfs Prudent  Mfs High

Very poor diversification

The 3 months correlation between Mfs and Mfs is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Prudent Investor and Mfs High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs High Income and Mfs Prudent 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 Prudent Investor are associated (or correlated) with Mfs High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs High Income has no effect on the direction of Mfs Prudent i.e., Mfs Prudent and Mfs High go up and down completely randomly.

Pair Corralation between Mfs Prudent and Mfs High

Assuming the 90 days horizon Mfs Prudent Investor is expected to generate 1.07 times more return on investment than Mfs High. However, Mfs Prudent is 1.07 times more volatile than Mfs High Income. It trades about 0.31 of its potential returns per unit of risk. Mfs High Income is currently generating about 0.06 per unit of risk. If you would invest  1,161  in Mfs Prudent Investor on December 18, 2024 and sell it today you would earn a total of  63.00  from holding Mfs Prudent Investor or generate 5.43% return on investment over 90 days.

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

Mfs Prudent Investor  vs.  Mfs High Income

Mfs Prudent Investor

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Prudent Investor are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mfs Prudent is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs High Income

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs High Income are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Mfs High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mfs Prudent and Mfs High

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

The idea behind Mfs Prudent Investor and Mfs High 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.