Correlation Between Aberdeen Japan and MFS High

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

By analyzing existing cross correlation between Aberdeen Japan Equity and MFS High Income, you can compare the effects of market volatilities on Aberdeen Japan and MFS High 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 Aberdeen Japan with a short position of MFS High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen Japan and MFS High.

Diversification Opportunities for Aberdeen Japan and MFS High

0.16

Correlation Coefficient

Aberdeen Japan  MFS High

Average diversification

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

Pair Corralation between Aberdeen Japan and MFS High

Considering the 90-day investment horizon Aberdeen Japan Equity is expected to generate 1.83 times more return on investment than MFS High. However, Aberdeen Japan is 1.83 times more volatile than MFS High Income. It trades about 0.21 of its potential returns per unit of risk. MFS High Income is currently generating about 0.06 per unit of risk. If you would invest  568.00  in Aberdeen Japan Equity on December 27, 2024 and sell it today you would earn a total of  101.00  from holding Aberdeen Japan Equity or generate 17.78% return on investment over 90 days.

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

Aberdeen Japan Equity  vs.  MFS High Income

Aberdeen Japan Equity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Japan Equity are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively weak technical and fundamental indicators, Aberdeen Japan reported solid returns over the last few months and may actually be approaching a breakup point.

MFS High Income

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MFS High Income are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, MFS High is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aberdeen Japan and MFS High

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

The idea behind Aberdeen Japan Equity and MFS High Income 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.