Correlation Between Mfs Prudent and Mfs Income

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

Diversification Opportunities for Mfs Prudent and Mfs Income

0.82

Correlation Coefficient

Mfs Prudent  Mfs Income

Very poor diversification

The 3 months correlation between Mfs and Mfs is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Prudent Investor and Mfs Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Income Fund 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 Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Income Fund has no effect on the direction of Mfs Prudent i.e., Mfs Prudent and Mfs Income go up and down completely randomly.

Pair Corralation between Mfs Prudent and Mfs Income

Assuming the 90 days horizon Mfs Prudent Investor is expected to under-perform the Mfs Income. In addition to that, Mfs Prudent is 2.04 times more volatile than Mfs Income Fund. It trades about -0.13 of its total potential returns per unit of risk. Mfs Income Fund is currently generating about -0.12 per unit of volatility. If you would invest  593.00  in Mfs Income Fund on October 6, 2024 and sell it today you would lose (9.00) from holding Mfs Income Fund or give up 1.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.62%
Values	Daily Returns

Mfs Prudent Investor  vs.  Mfs Income Fund

Mfs Prudent Investor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mfs Prudent Investor has generated negative risk-adjusted returns adding no value to fund investors. 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 Income Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mfs Income Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Mfs Income 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 Income

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

The idea behind Mfs Prudent Investor and Mfs Income Fund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.