Correlation Between Mfs Core and Mfs Global

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

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

Diversification Opportunities for Mfs Core and Mfs Global

0.87

Correlation Coefficient

Mfs Core  Mfs Global

Very poor diversification

The 3 months correlation between Mfs and Mfs is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mfs E Equity and Mfs Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Global Real and Mfs Core 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 E Equity are associated (or correlated) with Mfs Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Global Real has no effect on the direction of Mfs Core i.e., Mfs Core and Mfs Global go up and down completely randomly.

Pair Corralation between Mfs Core and Mfs Global

Assuming the 90 days horizon Mfs E Equity is expected to under-perform the Mfs Global. In addition to that, Mfs Core is 1.43 times more volatile than Mfs Global Real. It trades about -0.22 of its total potential returns per unit of risk. Mfs Global Real is currently generating about 0.18 per unit of volatility. If you would invest  1,606  in Mfs Global Real on December 5, 2024 and sell it today you would earn a total of  37.00  from holding Mfs Global Real or generate 2.3% return on investment over 90 days.

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

Mfs E Equity  vs.  Mfs Global Real

Mfs E Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mfs E Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Mfs Global Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mfs Global Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Mfs Global 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 Core and Mfs Global

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

The idea behind Mfs E Equity and Mfs Global Real 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.