Correlation Between MFS Active and Capital Group

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

By analyzing existing cross correlation between MFS Active Exchange and Capital Group Fixed, you can compare the effects of market volatilities on MFS Active and Capital Group 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 Active with a short position of Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS Active and Capital Group.

Diversification Opportunities for MFS Active and Capital Group

-0.18

Correlation Coefficient

MFS Active  Capital Group

Good diversification

The 3 months correlation between MFS and Capital is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding MFS Active Exchange and Capital Group Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Fixed and MFS Active 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 Active Exchange are associated (or correlated) with Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Fixed has no effect on the direction of MFS Active i.e., MFS Active and Capital Group go up and down completely randomly.

Pair Corralation between MFS Active and Capital Group

Given the investment horizon of 90 days MFS Active Exchange is expected to generate 7891.65 times more return on investment than Capital Group. However, MFS Active is 7891.65 times more volatile than Capital Group Fixed. It trades about 0.38 of its potential returns per unit of risk. Capital Group Fixed is currently generating about 0.35 per unit of risk. If you would invest  0.00  in MFS Active Exchange on September 14, 2024 and sell it today you would earn a total of  2,488  from holding MFS Active Exchange or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	33.33%
Values	Daily Returns

MFS Active Exchange  vs.  Capital Group Fixed

MFS Active Exchange

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Active Exchange are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, MFS Active sustained solid returns over the last few months and may actually be approaching a breakup point.

Capital Group Fixed

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Fixed are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Capital Group is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with MFS Active and Capital Group

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

The idea behind MFS Active Exchange and Capital Group Fixed 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.