Correlation Between IShares Core and MFS Active

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

By analyzing existing cross correlation between iShares Core SP and MFS Active Exchange, you can compare the effects of market volatilities on IShares Core and MFS Active 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 IShares Core with a short position of MFS Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and MFS Active.

Diversification Opportunities for IShares Core and MFS Active

-0.2

Correlation Coefficient

IShares Core  MFS Active

Good diversification

The 3 months correlation between IShares and MFS is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and MFS Active Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Active Exchange and IShares Core 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 iShares Core SP are associated (or correlated) with MFS Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Active Exchange has no effect on the direction of IShares Core i.e., IShares Core and MFS Active go up and down completely randomly.

Pair Corralation between IShares Core and MFS Active

Considering the 90-day investment horizon IShares Core is expected to generate 1185.67 times less return on investment than MFS Active. But when comparing it to its historical volatility, iShares Core SP is 564.45 times less risky than MFS Active. It trades about 0.18 of its potential returns per unit of risk. MFS Active Exchange is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  0.00  in MFS Active Exchange on September 14, 2024 and sell it today you would earn a total of  2,488  from holding MFS Active Exchange or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	11.11%
Values	Daily Returns

iShares Core SP  vs.  MFS Active Exchange

iShares Core SP

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, IShares Core may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MFS Active Exchange

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Active Exchange are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, MFS Active sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Core and MFS Active

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

The idea behind iShares Core SP and MFS Active Exchange 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.