Correlation Between MFS Government and Nuveen Variable

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

Diversification Opportunities for MFS Government and Nuveen Variable

0.05

Correlation Coefficient

MFS Government  Nuveen Variable

Significant diversification

The 3 months correlation between MFS and Nuveen is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding MFS Government Markets and Nuveen Variable Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Variable 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 Variable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Variable Rate has no effect on the direction of MFS Government i.e., MFS Government and Nuveen Variable go up and down completely randomly.

Pair Corralation between MFS Government and Nuveen Variable

Considering the 90-day investment horizon MFS Government is expected to generate 3.28 times less return on investment than Nuveen Variable. But when comparing it to its historical volatility, MFS Government Markets is 1.31 times less risky than Nuveen Variable. It trades about 0.02 of its potential returns per unit of risk. Nuveen Variable Rate is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,572  in Nuveen Variable Rate on October 10, 2024 and sell it today you would earn a total of  312.00  from holding Nuveen Variable Rate or generate 19.85% return on investment over 90 days.

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

MFS Government Markets  vs.  Nuveen Variable Rate

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.

Nuveen Variable Rate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Variable Rate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Nuveen Variable is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MFS Government and Nuveen Variable

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

The idea behind MFS Government Markets and Nuveen Variable 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.