Correlation Between Mfs International and Adams Diversified

Can any of the company-specific risk be diversified away by investing in both Mfs International and Adams Diversified 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 International and Adams Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mfs International Large and Adams Diversified Equity, you can compare the effects of market volatilities on Mfs International and Adams Diversified 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 International with a short position of Adams Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs International and Adams Diversified.

Diversification Opportunities for Mfs International and Adams Diversified

-0.3

Correlation Coefficient

Mfs International  Adams Diversified

Very good diversification

The 3 months correlation between Mfs and Adams is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Mfs International Large and Adams Diversified Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Diversified Equity and Mfs International 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 International Large are associated (or correlated) with Adams Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Diversified Equity has no effect on the direction of Mfs International i.e., Mfs International and Adams Diversified go up and down completely randomly.

Pair Corralation between Mfs International and Adams Diversified

Assuming the 90 days horizon Mfs International Large is expected to generate 0.81 times more return on investment than Adams Diversified. However, Mfs International Large is 1.24 times less risky than Adams Diversified. It trades about 0.3 of its potential returns per unit of risk. Adams Diversified Equity is currently generating about -0.05 per unit of risk. If you would invest  1,289  in Mfs International Large on December 19, 2024 and sell it today you would earn a total of  192.00  from holding Mfs International Large or generate 14.9% return on investment over 90 days.

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

Mfs International Large  vs.  Adams Diversified Equity

Mfs International Large

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs International Large are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Mfs International showed solid returns over the last few months and may actually be approaching a breakup point.

Adams Diversified Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adams Diversified Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Adams Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mfs International and Adams Diversified

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

The idea behind Mfs International Large and Adams Diversified 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.