Correlation Between MFS Municipal and Templeton Emerging | MFM vs. EMF

Correlation Between MFS Municipal and Templeton Emerging

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Can any of the company-specific risk be diversified away by investing in both MFS Municipal and Templeton Emerging 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 Municipal and Templeton Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFS Municipal Income and Templeton Emerging Markets, you can compare the effects of market volatilities on MFS Municipal and Templeton Emerging 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 Municipal with a short position of Templeton Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS Municipal and Templeton Emerging.

Diversification Opportunities for MFS Municipal and Templeton Emerging

MFSTempletonDiversified AwayMFSTempletonDiversified Away100%
0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between MFS and Templeton is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding MFS Municipal Income and Templeton Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Emerging and MFS Municipal 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 Municipal Income are associated (or correlated) with Templeton Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Emerging has no effect on the direction of MFS Municipal i.e., MFS Municipal and Templeton Emerging go up and down completely randomly.

Pair Corralation between MFS Municipal and Templeton Emerging

Considering the 90-day investment horizon MFS Municipal Income is expected to under-perform the Templeton Emerging. But the stock apears to be less risky and, when comparing its historical volatility, MFS Municipal Income is 1.47 times less risky than Templeton Emerging. The stock trades about -0.25 of its potential returns per unit of risk. The Templeton Emerging Markets is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,204  in Templeton Emerging Markets on September 23, 2024 and sell it today you would lose (7.00) from holding Templeton Emerging Markets or give up 0.58% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

MFS Municipal Income  vs.  Templeton Emerging Markets

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -4-20246810
JavaScript chart by amCharts 3.21.15MFM EMF
       Timeline  
MFS Municipal Income 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MFS Municipal Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, MFS Municipal is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec5.35.355.45.455.55.555.65.655.7
Templeton Emerging 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Templeton Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable primary indicators, Templeton Emerging is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec1212.51313.5

MFS Municipal and Templeton Emerging Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.09-0.8-0.51-0.22-0.03220.08010.340.630.92 0.20.40.60.8
JavaScript chart by amCharts 3.21.15MFM EMF
       Returns  

Pair Trading with MFS Municipal and Templeton Emerging

The main advantage of trading using opposite MFS Municipal and Templeton Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFS Municipal position performs unexpectedly, Templeton Emerging 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 Templeton Emerging will offset losses from the drop in Templeton Emerging's long position.
The idea behind MFS Municipal Income and Templeton Emerging Markets 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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