Correlation Between Nuveen California and Mfs International

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

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

Diversification Opportunities for Nuveen California and Mfs International

0.55

Correlation Coefficient

Nuveen California  Mfs International

Very weak diversification

The 3 months correlation between Nuveen and Mfs is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen California Municipal 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 Nuveen California 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 Nuveen California Municipal 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 Nuveen California i.e., Nuveen California and Mfs International go up and down completely randomly.

Pair Corralation between Nuveen California and Mfs International

Assuming the 90 days horizon Nuveen California is expected to generate 26.32 times less return on investment than Mfs International. But when comparing it to its historical volatility, Nuveen California Municipal is 3.73 times less risky than Mfs International. It trades about 0.04 of its potential returns per unit of risk. Mfs International Large is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,292  in Mfs International Large on December 20, 2024 and sell it today you would earn a total of  184.00  from holding Mfs International Large or generate 14.24% return on investment over 90 days.

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

Nuveen California Municipal  vs.  Mfs International Large

Nuveen California

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen California Municipal are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nuveen California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs International Large

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs International Large are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Mfs International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nuveen California and Mfs International

The main advantage of trading using opposite Nuveen California and Mfs International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen California 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 Nuveen California Municipal 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.