Correlation Between MFS Government and Gabelli Equity

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

Diversification Opportunities for MFS Government and Gabelli Equity

0.68

Correlation Coefficient

MFS Government  Gabelli Equity

Poor diversification

The 3 months correlation between MFS and Gabelli is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding MFS Government Markets and The Gabelli Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity 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 Gabelli Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Equity has no effect on the direction of MFS Government i.e., MFS Government and Gabelli Equity go up and down completely randomly.

Pair Corralation between MFS Government and Gabelli Equity

Considering the 90-day investment horizon MFS Government Markets is expected to generate 0.85 times more return on investment than Gabelli Equity. However, MFS Government Markets is 1.17 times less risky than Gabelli Equity. It trades about -0.07 of its potential returns per unit of risk. The Gabelli Equity is currently generating about -0.17 per unit of risk. If you would invest  319.00  in MFS Government Markets on October 10, 2024 and sell it today you would lose (10.00) from holding MFS Government Markets or give up 3.13% of portfolio value over 90 days.

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

MFS Government Markets  vs.  The Gabelli Equity

MFS Government Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS Government Markets has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, MFS Government is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Gabelli Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Equity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with MFS Government and Gabelli Equity

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

The idea behind MFS Government Markets and The Gabelli Equity 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.