Correlation Between Mfs Union and Icon Natural

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

By analyzing existing cross correlation between Mfs Union Standard and Icon Natural Resources, you can compare the effects of market volatilities on Mfs Union and Icon Natural 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 Union with a short position of Icon Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs Union and Icon Natural.

Diversification Opportunities for Mfs Union and Icon Natural

0.8

Correlation Coefficient

Mfs Union  Icon Natural

Very poor diversification

The 3 months correlation between Mfs and Icon is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Union Standard and Icon Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Natural Resources and Mfs Union 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 Union Standard are associated (or correlated) with Icon Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Natural Resources has no effect on the direction of Mfs Union i.e., Mfs Union and Icon Natural go up and down completely randomly.

Pair Corralation between Mfs Union and Icon Natural

Assuming the 90 days horizon Mfs Union Standard is expected to under-perform the Icon Natural. In addition to that, Mfs Union is 1.0 times more volatile than Icon Natural Resources. It trades about -0.1 of its total potential returns per unit of risk. Icon Natural Resources is currently generating about -0.09 per unit of volatility. If you would invest  1,851  in Icon Natural Resources on October 14, 2024 and sell it today you would lose (155.00) from holding Icon Natural Resources or give up 8.37% of portfolio value over 90 days.

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

Mfs Union Standard  vs.  Icon Natural Resources

Mfs Union Standard

Risk-Adjusted Performance

0 of 100

Very Weak

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

Icon Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Icon Natural Resources 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.

Pair Trading with Mfs Union and Icon Natural

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

The idea behind Mfs Union Standard and Icon Natural Resources 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.