Correlation Between Mfs International and Mfs Income

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

Diversification Opportunities for Mfs International and Mfs Income

0.89

Correlation Coefficient

Mfs International  Mfs Income

Very poor diversification

The 3 months correlation between Mfs and Mfs is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Mfs International Large and Mfs Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Income Fund 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 Mfs Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Income Fund has no effect on the direction of Mfs International i.e., Mfs International and Mfs Income go up and down completely randomly.

Pair Corralation between Mfs International and Mfs Income

Assuming the 90 days horizon Mfs International Large is expected to generate 2.56 times more return on investment than Mfs Income. However, Mfs International is 2.56 times more volatile than Mfs Income Fund. It trades about 0.3 of its potential returns per unit of risk. Mfs Income Fund is currently generating about 0.13 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 Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Mfs International Large  vs.  Mfs Income Fund

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.

Mfs Income Fund

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Income Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mfs Income 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 Mfs Income

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

The idea behind Mfs International Large and Mfs Income Fund 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.