Correlation Between MFS Municipal and Virtus Global

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

Diversification Opportunities for MFS Municipal and Virtus Global

0.72

Correlation Coefficient

MFS Municipal  Virtus Global

Poor diversification

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

Pair Corralation between MFS Municipal and Virtus Global

Considering the 90-day investment horizon MFS Municipal Income is expected to under-perform the Virtus Global. In addition to that, MFS Municipal is 1.08 times more volatile than Virtus Global Multi. It trades about -0.26 of its total potential returns per unit of risk. Virtus Global Multi is currently generating about -0.21 per unit of volatility. If you would invest  794.00  in Virtus Global Multi on September 28, 2024 and sell it today you would lose (24.00) from holding Virtus Global Multi or give up 3.02% of portfolio value over 90 days.

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

MFS Municipal Income  vs.  Virtus Global Multi

MFS Municipal Income

Risk-Adjusted Performance

0 of 100

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.

Virtus Global Multi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus Global Multi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Virtus Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with MFS Municipal and Virtus Global

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

The idea behind MFS Municipal Income and Virtus Global Multi 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.