Correlation Between MFS Government and Eaton Vance

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

By analyzing existing cross correlation between MFS Government Markets and Eaton Vance National, you can compare the effects of market volatilities on MFS Government and Eaton Vance 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 Government with a short position of Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS Government and Eaton Vance.

Diversification Opportunities for MFS Government and Eaton Vance

0.54

Correlation Coefficient

MFS Government  Eaton Vance

Very weak diversification

The 3 months correlation between MFS and Eaton is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding MFS Government Markets and Eaton Vance National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance National and MFS Government 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 Government Markets are associated (or correlated) with Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance National has no effect on the direction of MFS Government i.e., MFS Government and Eaton Vance go up and down completely randomly.

Pair Corralation between MFS Government and Eaton Vance

Considering the 90-day investment horizon MFS Government Markets is expected to generate 0.92 times more return on investment than Eaton Vance. However, MFS Government Markets is 1.09 times less risky than Eaton Vance. It trades about 0.08 of its potential returns per unit of risk. Eaton Vance National is currently generating about 0.03 per unit of risk. If you would invest  303.00  in MFS Government Markets on December 26, 2024 and sell it today you would earn a total of  8.00  from holding MFS Government Markets or generate 2.64% return on investment over 90 days.

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

MFS Government Markets  vs.  Eaton Vance National

MFS Government Markets

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Government Markets are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, MFS Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Eaton Vance National

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance National are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Eaton Vance is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MFS Government and Eaton Vance

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

The idea behind MFS Government Markets and Eaton Vance National 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.