Correlation Between Leader Short-term and Mfs Total

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

By analyzing existing cross correlation between Leader Short Term Bond and Mfs Total Return, you can compare the effects of market volatilities on Leader Short-term and Mfs Total 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 Leader Short-term with a short position of Mfs Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leader Short-term and Mfs Total.

Diversification Opportunities for Leader Short-term and Mfs Total

0.8

Correlation Coefficient

Leader Short-term  Mfs Total

Very poor diversification

The 3 months correlation between Leader and Mfs is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Leader Short Term Bond and Mfs Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Total Return and Leader Short-term 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 Leader Short Term Bond are associated (or correlated) with Mfs Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Total Return has no effect on the direction of Leader Short-term i.e., Leader Short-term and Mfs Total go up and down completely randomly.

Pair Corralation between Leader Short-term and Mfs Total

Assuming the 90 days horizon Leader Short-term is expected to generate 1.1 times less return on investment than Mfs Total. But when comparing it to its historical volatility, Leader Short Term Bond is 1.45 times less risky than Mfs Total. It trades about 0.19 of its potential returns per unit of risk. Mfs Total Return is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  930.00  in Mfs Total Return on December 20, 2024 and sell it today you would earn a total of  24.00  from holding Mfs Total Return or generate 2.58% return on investment over 90 days.

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

Leader Short Term Bond  vs.  Mfs Total Return

Leader Short Term

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leader Short Term Bond are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Leader Short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs Total Return

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Total Return are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Mfs Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Leader Short-term and Mfs Total

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

The idea behind Leader Short Term Bond and Mfs Total Return 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.