Correlation Between Mfs Growth and Six Circles

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

By analyzing existing cross correlation between Mfs Growth Allocation and Six Circles Managed, you can compare the effects of market volatilities on Mfs Growth and Six Circles 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 Mfs Growth with a short position of Six Circles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs Growth and Six Circles.

Diversification Opportunities for Mfs Growth and Six Circles

0.72

Correlation Coefficient

Mfs Growth  Six Circles

Poor diversification

The 3 months correlation between Mfs and Six is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Growth Allocation and Six Circles Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Circles Managed and Mfs Growth 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 Mfs Growth Allocation are associated (or correlated) with Six Circles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Circles Managed has no effect on the direction of Mfs Growth i.e., Mfs Growth and Six Circles go up and down completely randomly.

Pair Corralation between Mfs Growth and Six Circles

Assuming the 90 days horizon Mfs Growth Allocation is expected to generate 0.59 times more return on investment than Six Circles. However, Mfs Growth Allocation is 1.69 times less risky than Six Circles. It trades about 0.02 of its potential returns per unit of risk. Six Circles Managed is currently generating about -0.07 per unit of risk. If you would invest  2,406  in Mfs Growth Allocation on December 26, 2024 and sell it today you would earn a total of  16.00  from holding Mfs Growth Allocation or generate 0.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Mfs Growth Allocation  vs.  Six Circles Managed

Mfs Growth Allocation

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Growth Allocation are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Mfs Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Six Circles Managed

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Mfs Growth and Six Circles

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

The idea behind Mfs Growth Allocation and Six Circles Managed 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.