Correlation Between Mfs Utilities and Vanguard Utilities

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

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

Diversification Opportunities for Mfs Utilities and Vanguard Utilities

0.9

Correlation Coefficient

Mfs Utilities  Vanguard Utilities

Almost no diversification

The 3 months correlation between MFS and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Utilities Fund and Vanguard Utilities Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Utilities Index and Mfs Utilities 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 Utilities Fund are associated (or correlated) with Vanguard Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Utilities Index has no effect on the direction of Mfs Utilities i.e., Mfs Utilities and Vanguard Utilities go up and down completely randomly.

Pair Corralation between Mfs Utilities and Vanguard Utilities

Assuming the 90 days horizon Mfs Utilities is expected to generate 1.45 times less return on investment than Vanguard Utilities. But when comparing it to its historical volatility, Mfs Utilities Fund is 1.12 times less risky than Vanguard Utilities. It trades about 0.12 of its potential returns per unit of risk. Vanguard Utilities Index is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  8,204  in Vanguard Utilities Index on September 2, 2024 and sell it today you would earn a total of  773.00  from holding Vanguard Utilities Index or generate 9.42% return on investment over 90 days.

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

Mfs Utilities Fund  vs.  Vanguard Utilities Index

Mfs Utilities

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Utilities Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mfs Utilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Utilities Index

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Utilities Index are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Utilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mfs Utilities and Vanguard Utilities

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

The idea behind Mfs Utilities Fund and Vanguard Utilities Index 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 Stocks Directory module to find actively traded stocks across global markets.