Correlation Between GM and Mfs Utilities

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

Diversification Opportunities for GM and Mfs Utilities

0.16

Correlation Coefficient

GM  Mfs Utilities

Average diversification

The 3 months correlation between GM and Mfs is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mfs Utilities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Utilities 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 Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Utilities has no effect on the direction of GM i.e., GM and Mfs Utilities go up and down completely randomly.

Pair Corralation between GM and Mfs Utilities

Allowing for the 90-day total investment horizon General Motors is expected to generate 2.4 times more return on investment than Mfs Utilities. However, GM is 2.4 times more volatile than Mfs Utilities Fund. It trades about -0.01 of its potential returns per unit of risk. Mfs Utilities Fund is currently generating about -0.02 per unit of risk. If you would invest  5,404  in General Motors on December 25, 2024 and sell it today you would lose (145.00) from holding General Motors or give up 2.68% of portfolio value over 90 days.

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

General Motors  vs.  Mfs Utilities Fund

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 Utilities

Risk-Adjusted Performance

Very Weak

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

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

The idea behind General Motors and Mfs Utilities 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..