Correlation Between MFS Active and Columbia Diversified

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

Diversification Opportunities for MFS Active and Columbia Diversified

0.02

Correlation Coefficient

MFS Active  Columbia Diversified

Significant diversification

The 3 months correlation between MFS and Columbia is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding MFS Active Exchange and Columbia Diversified Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Diversified 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 Columbia Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Diversified has no effect on the direction of MFS Active i.e., MFS Active and Columbia Diversified go up and down completely randomly.

Pair Corralation between MFS Active and Columbia Diversified

Given the investment horizon of 90 days MFS Active Exchange is expected to generate 1141.04 times more return on investment than Columbia Diversified. However, MFS Active is 1141.04 times more volatile than Columbia Diversified Fixed. It trades about 0.35 of its potential returns per unit of risk. Columbia Diversified Fixed is currently generating about -0.11 per unit of risk. If you would invest  0.00  in MFS Active Exchange on September 15, 2024 and sell it today you would earn a total of  2,479  from holding MFS Active Exchange or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	12.5%
Values	Daily Returns

MFS Active Exchange  vs.  Columbia Diversified Fixed

MFS Active Exchange

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Active Exchange are ranked lower than 27 (%) 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.

Columbia Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Diversified Fixed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Columbia Diversified is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with MFS Active and Columbia Diversified

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

The idea behind MFS Active Exchange and Columbia Diversified 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.