Correlation Between Midcap Fund and Mfs Growth

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

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

Diversification Opportunities for Midcap Fund and Mfs Growth

0.88

Correlation Coefficient

Midcap Fund  Mfs Growth

Very poor diversification

The 3 months correlation between Midcap and Mfs is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund Institutional and Mfs Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Growth Fund and Midcap Fund 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 Midcap Fund Institutional are associated (or correlated) with Mfs Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Growth Fund has no effect on the direction of Midcap Fund i.e., Midcap Fund and Mfs Growth go up and down completely randomly.

Pair Corralation between Midcap Fund and Mfs Growth

Assuming the 90 days horizon Midcap Fund is expected to generate 1.3 times less return on investment than Mfs Growth. But when comparing it to its historical volatility, Midcap Fund Institutional is 1.28 times less risky than Mfs Growth. It trades about 0.07 of its potential returns per unit of risk. Mfs Growth Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  14,480  in Mfs Growth Fund on October 23, 2024 and sell it today you would earn a total of  6,292  from holding Mfs Growth Fund or generate 43.45% return on investment over 90 days.

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

Midcap Fund Institutional  vs.  Mfs Growth Fund

Midcap Fund Institutional

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Midcap Fund Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Midcap Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs Growth Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mfs Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Mfs Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Midcap Fund and Mfs Growth

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

The idea behind Midcap Fund Institutional and Mfs Growth Fund 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.