Correlation Between Mid-cap Value and Mfs International

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

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

Diversification Opportunities for Mid-cap Value and Mfs International

-0.56

Correlation Coefficient

Mid-cap Value  Mfs International

Excellent diversification

The 3 months correlation between Mid-cap and Mfs is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value Profund and Mfs International Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs International Large and Mid-cap Value 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 Mid Cap Value Profund are associated (or correlated) with Mfs International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs International Large has no effect on the direction of Mid-cap Value i.e., Mid-cap Value and Mfs International go up and down completely randomly.

Pair Corralation between Mid-cap Value and Mfs International

Assuming the 90 days horizon Mid Cap Value Profund is expected to generate 1.61 times more return on investment than Mfs International. However, Mid-cap Value is 1.61 times more volatile than Mfs International Large. It trades about 0.23 of its potential returns per unit of risk. Mfs International Large is currently generating about -0.07 per unit of risk. If you would invest  8,924  in Mid Cap Value Profund on September 6, 2024 and sell it today you would earn a total of  535.00  from holding Mid Cap Value Profund or generate 6.0% return on investment over 90 days.

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

Mid Cap Value Profund  vs.  Mfs International Large

Mid Cap Value

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Value Profund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mid-cap Value showed solid returns over the last few months and may actually be approaching a breakup point.

Mfs International Large

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mid-cap Value and Mfs International

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

The idea behind Mid Cap Value Profund and Mfs International Large 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.