Correlation Between MFS Government and Nuveen Floating

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

Diversification Opportunities for MFS Government and Nuveen Floating

-0.38

Correlation Coefficient

MFS Government  Nuveen Floating

Very good diversification

The 3 months correlation between MFS and Nuveen is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding MFS Government Markets and Nuveen Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Floating Rate 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 Nuveen Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Floating Rate has no effect on the direction of MFS Government i.e., MFS Government and Nuveen Floating go up and down completely randomly.

Pair Corralation between MFS Government and Nuveen Floating

Considering the 90-day investment horizon MFS Government Markets is expected to generate 0.87 times more return on investment than Nuveen Floating. However, MFS Government Markets is 1.16 times less risky than Nuveen Floating. It trades about 0.12 of its potential returns per unit of risk. Nuveen Floating Rate is currently generating about -0.07 per unit of risk. If you would invest  299.00  in MFS Government Markets on December 27, 2024 and sell it today you would earn a total of  11.00  from holding MFS Government Markets or generate 3.68% return on investment over 90 days.

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

MFS Government Markets  vs.  Nuveen Floating Rate

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 9 (%) 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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Nuveen Floating Rate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Floating Rate has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable technical and fundamental indicators, Nuveen Floating is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with MFS Government and Nuveen Floating

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

The idea behind MFS Government Markets and Nuveen Floating Rate 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.