Correlation Between Gabelli Multimedia and MFS Government

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

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

Diversification Opportunities for Gabelli Multimedia and MFS Government

0.23

Correlation Coefficient

Gabelli Multimedia  MFS Government

Modest diversification

The 3 months correlation between Gabelli and MFS is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Multimedia and MFS Government Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Government Markets and Gabelli Multimedia 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 Multimedia are associated (or correlated) with MFS Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Government Markets has no effect on the direction of Gabelli Multimedia i.e., Gabelli Multimedia and MFS Government go up and down completely randomly.

Pair Corralation between Gabelli Multimedia and MFS Government

Assuming the 90 days trading horizon Gabelli Multimedia is expected to generate 4.02 times less return on investment than MFS Government. But when comparing it to its historical volatility, The Gabelli Multimedia is 1.14 times less risky than MFS Government. It trades about 0.02 of its potential returns per unit of risk. MFS Government Markets is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  303.00  in MFS Government Markets on December 19, 2024 and sell it today you would earn a total of  7.00  from holding MFS Government Markets or generate 2.31% return on investment over 90 days.

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

The Gabelli Multimedia  vs.  MFS Government Markets

The Gabelli Multimedia

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Multimedia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Gabelli Multimedia is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

MFS Government Markets

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Government Markets are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, MFS Government is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gabelli Multimedia and MFS Government

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

The idea behind The Gabelli Multimedia and MFS Government Markets 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.