Correlation Between Gabelli Equity and MFS Investment

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

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

Diversification Opportunities for Gabelli Equity and MFS Investment

0.44

Correlation Coefficient

Gabelli Equity  MFS Investment

Very weak diversification

The 3 months correlation between Gabelli and MFS is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Equity 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 Gabelli Equity 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 The Gabelli Equity 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 Gabelli Equity i.e., Gabelli Equity and MFS Investment go up and down completely randomly.

Pair Corralation between Gabelli Equity and MFS Investment

Assuming the 90 days trading horizon Gabelli Equity is expected to generate 4.45 times less return on investment than MFS Investment. But when comparing it to its historical volatility, The Gabelli Equity is 1.12 times less risky than MFS Investment. It trades about 0.01 of its potential returns per unit of risk. MFS Investment Grade is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  688.00  in MFS Investment Grade on October 3, 2024 and sell it today you would earn a total of  111.00  from holding MFS Investment Grade or generate 16.13% return on investment over 90 days.

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

The Gabelli Equity  vs.  MFS Investment Grade

Gabelli Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Equity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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

Pair Trading with Gabelli Equity and MFS Investment

The main advantage of trading using opposite Gabelli Equity and MFS Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gabelli Equity 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 The Gabelli Equity 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.