Correlation Between GM and Mfs Global

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

By analyzing existing cross correlation between General Motors and Mfs Global Alternative, you can compare the effects of market volatilities on GM and Mfs Global 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 GM with a short position of Mfs Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Mfs Global.

Diversification Opportunities for GM and Mfs Global

-0.68

Correlation Coefficient

GM  Mfs Global

Excellent diversification

The 3 months correlation between GM and Mfs is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mfs Global Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Global Alternative and GM 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 General Motors are associated (or correlated) with Mfs Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Global Alternative has no effect on the direction of GM i.e., GM and Mfs Global go up and down completely randomly.

Pair Corralation between GM and Mfs Global

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Mfs Global. In addition to that, GM is 9.29 times more volatile than Mfs Global Alternative. It trades about -0.03 of its total potential returns per unit of risk. Mfs Global Alternative is currently generating about 0.26 per unit of volatility. If you would invest  1,303  in Mfs Global Alternative on December 24, 2024 and sell it today you would earn a total of  55.00  from holding Mfs Global Alternative or generate 4.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

General Motors  vs.  Mfs Global Alternative

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Mfs Global Alternative

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Global Alternative are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Mfs Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Mfs Global

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

The idea behind General Motors and Mfs Global Alternative 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.