Correlation Between Mfs Technology and Transportation Fund

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

By analyzing existing cross correlation between Mfs Technology Fund and Transportation Fund Class, you can compare the effects of market volatilities on Mfs Technology and Transportation Fund 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 Technology with a short position of Transportation Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs Technology and Transportation Fund.

Diversification Opportunities for Mfs Technology and Transportation Fund

0.93

Correlation Coefficient

Mfs Technology  Transportation Fund

Almost no diversification

The 3 months correlation between Mfs and Transportation is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Technology Fund and Transportation Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportation Fund Class and Mfs Technology 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 Technology Fund are associated (or correlated) with Transportation Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportation Fund Class has no effect on the direction of Mfs Technology i.e., Mfs Technology and Transportation Fund go up and down completely randomly.

Pair Corralation between Mfs Technology and Transportation Fund

Assuming the 90 days horizon Mfs Technology Fund is expected to generate 1.21 times more return on investment than Transportation Fund. However, Mfs Technology is 1.21 times more volatile than Transportation Fund Class. It trades about -0.12 of its potential returns per unit of risk. Transportation Fund Class is currently generating about -0.19 per unit of risk. If you would invest  7,359  in Mfs Technology Fund on December 24, 2024 and sell it today you would lose (835.00) from holding Mfs Technology Fund or give up 11.35% of portfolio value over 90 days.

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

Mfs Technology Fund  vs.  Transportation Fund Class

Mfs Technology

Risk-Adjusted Performance

Very Weak

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

Transportation Fund Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transportation Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Mfs Technology and Transportation Fund

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

The idea behind Mfs Technology Fund and Transportation Fund Class 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.