Correlation Between MFS Active and PIMCO Mortgage

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

By analyzing existing cross correlation between MFS Active Core and PIMCO Mortgage Backed Securities, you can compare the effects of market volatilities on MFS Active and PIMCO Mortgage 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 PIMCO Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS Active and PIMCO Mortgage.

Diversification Opportunities for MFS Active and PIMCO Mortgage

0.99

Correlation Coefficient

MFS Active  PIMCO Mortgage

No risk reduction

The 3 months correlation between MFS and PIMCO is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding MFS Active Core and PIMCO Mortgage Backed Securiti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Mortgage Backed 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 Core are associated (or correlated) with PIMCO Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Mortgage Backed has no effect on the direction of MFS Active i.e., MFS Active and PIMCO Mortgage go up and down completely randomly.

Pair Corralation between MFS Active and PIMCO Mortgage

Given the investment horizon of 90 days MFS Active is expected to generate 1.48 times less return on investment than PIMCO Mortgage. But when comparing it to its historical volatility, MFS Active Core is 1.14 times less risky than PIMCO Mortgage. It trades about 0.11 of its potential returns per unit of risk. PIMCO Mortgage Backed Securities is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,747  in PIMCO Mortgage Backed Securities on December 26, 2024 and sell it today you would earn a total of  134.00  from holding PIMCO Mortgage Backed Securities or generate 2.82% return on investment over 90 days.

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

MFS Active Core  vs.  PIMCO Mortgage Backed Securiti

MFS Active Core

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Active Core are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MFS Active is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PIMCO Mortgage Backed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PIMCO Mortgage Backed Securities are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, PIMCO Mortgage is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MFS Active and PIMCO Mortgage

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

The idea behind MFS Active Core and PIMCO Mortgage Backed Securities 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.