Correlation Between Invesco Energy and Mfs International

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

By analyzing existing cross correlation between Invesco Energy Fund and Mfs International Value, you can compare the effects of market volatilities on Invesco Energy and Mfs International 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 Invesco Energy with a short position of Mfs International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Energy and Mfs International.

Diversification Opportunities for Invesco Energy and Mfs International

0.49

Correlation Coefficient

Invesco Energy  Mfs International

Very weak diversification

The 3 months correlation between Invesco and Mfs is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Energy Fund and Mfs International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs International Value and Invesco Energy 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 Invesco Energy Fund are associated (or correlated) with Mfs International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs International Value has no effect on the direction of Invesco Energy i.e., Invesco Energy and Mfs International go up and down completely randomly.

Pair Corralation between Invesco Energy and Mfs International

Assuming the 90 days horizon Invesco Energy Fund is expected to generate 1.25 times more return on investment than Mfs International. However, Invesco Energy is 1.25 times more volatile than Mfs International Value. It trades about 0.01 of its potential returns per unit of risk. Mfs International Value is currently generating about 0.0 per unit of risk. If you would invest  2,317  in Invesco Energy Fund on October 12, 2024 and sell it today you would earn a total of  101.00  from holding Invesco Energy Fund or generate 4.36% return on investment over 90 days.

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

Invesco Energy Fund  vs.  Mfs International Value

Invesco Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Energy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Invesco Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs International Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mfs International Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Invesco Energy and Mfs International

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

The idea behind Invesco Energy Fund and Mfs International Value 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.