Correlation Between MFS Charter and Visa

Can any of the company-specific risk be diversified away by investing in both MFS Charter and Visa 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 Visa 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 Visa Class A, you can compare the effects of market volatilities on MFS Charter and Visa 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 Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS Charter and Visa.

Diversification Opportunities for MFS Charter and Visa

-0.54

Correlation Coefficient

MFS Charter  Visa

Excellent diversification

The 3 months correlation between MFS and Visa is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding MFS Charter Income and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of MFS Charter i.e., MFS Charter and Visa go up and down completely randomly.

Pair Corralation between MFS Charter and Visa

Considering the 90-day investment horizon MFS Charter is expected to generate 9.08 times less return on investment than Visa. But when comparing it to its historical volatility, MFS Charter Income is 2.78 times less risky than Visa. It trades about 0.05 of its potential returns per unit of risk. Visa Class A is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  27,801  in Visa Class A on September 3, 2024 and sell it today you would earn a total of  3,864  from holding Visa Class A or generate 13.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

MFS Charter Income  vs.  Visa Class A

MFS Charter Income

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Charter Income are ranked lower than 4 (%) 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.

Visa Class A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MFS Charter and Visa

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

The idea behind MFS Charter Income and Visa Class A 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 CEOs Directory module to screen CEOs from public companies around the world.