Correlation Between Mfs International and Mfs Value

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

By analyzing existing cross correlation between Mfs International Diversification and Mfs Value Fund, you can compare the effects of market volatilities on Mfs International and Mfs Value 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 International with a short position of Mfs Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs International and Mfs Value.

Diversification Opportunities for Mfs International and Mfs Value

0.45

Correlation Coefficient

Mfs International  Mfs Value

Very weak diversification

The 3 months correlation between MFS and Mfs is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Mfs International Diversificat and Mfs Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Value Fund and Mfs International 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 International Diversification are associated (or correlated) with Mfs Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Value Fund has no effect on the direction of Mfs International i.e., Mfs International and Mfs Value go up and down completely randomly.

Pair Corralation between Mfs International and Mfs Value

Assuming the 90 days horizon Mfs International Diversification is expected to generate 0.58 times more return on investment than Mfs Value. However, Mfs International Diversification is 1.73 times less risky than Mfs Value. It trades about 0.03 of its potential returns per unit of risk. Mfs Value Fund is currently generating about -0.08 per unit of risk. If you would invest  2,397  in Mfs International Diversification on December 5, 2024 and sell it today you would earn a total of  25.00  from holding Mfs International Diversification or generate 1.04% return on investment over 90 days.

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

Mfs International Diversificat  vs.  Mfs Value Fund

Mfs International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs International Diversification are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Mfs International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs Value Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mfs Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Mfs Value 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 International and Mfs Value

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

The idea behind Mfs International Diversification and Mfs Value Fund 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.