Correlation Between MFS Charter and Nuveen Core

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

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

Diversification Opportunities for MFS Charter and Nuveen Core

0.72

Correlation Coefficient

MFS Charter  Nuveen Core

Poor diversification

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

Pair Corralation between MFS Charter and Nuveen Core

Considering the 90-day investment horizon MFS Charter is expected to generate 1.51 times less return on investment than Nuveen Core. But when comparing it to its historical volatility, MFS Charter Income is 1.04 times less risky than Nuveen Core. It trades about 0.1 of its potential returns per unit of risk. Nuveen Core Plus is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,013  in Nuveen Core Plus on December 27, 2024 and sell it today you would earn a total of  51.00  from holding Nuveen Core Plus or generate 5.03% return on investment over 90 days.

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

MFS Charter Income  vs.  Nuveen Core Plus

MFS Charter Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Charter Income are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, MFS Charter is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Nuveen Core Plus

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Core Plus are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Nuveen Core is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MFS Charter and Nuveen Core

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

The idea behind MFS Charter Income and Nuveen Core Plus 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.