Correlation Between Pace Large and Mfs Massachusetts

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

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

Diversification Opportunities for Pace Large and Mfs Massachusetts

0.61

Correlation Coefficient

Pace Large  Mfs Massachusetts

Poor diversification

The 3 months correlation between Pace and Mfs is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Pace Large Value and Mfs Massachusetts Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Massachusetts and Pace Large 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 Pace Large Value are associated (or correlated) with Mfs Massachusetts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Massachusetts has no effect on the direction of Pace Large i.e., Pace Large and Mfs Massachusetts go up and down completely randomly.

Pair Corralation between Pace Large and Mfs Massachusetts

Assuming the 90 days horizon Pace Large Value is expected to under-perform the Mfs Massachusetts. In addition to that, Pace Large is 2.98 times more volatile than Mfs Massachusetts Municipal. It trades about -0.17 of its total potential returns per unit of risk. Mfs Massachusetts Municipal is currently generating about -0.41 per unit of volatility. If you would invest  1,037  in Mfs Massachusetts Municipal on October 11, 2024 and sell it today you would lose (22.00) from holding Mfs Massachusetts Municipal or give up 2.12% of portfolio value over 90 days.

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

Pace Large Value  vs.  Mfs Massachusetts Municipal

Pace Large Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mfs Massachusetts

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Pace Large and Mfs Massachusetts

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

The idea behind Pace Large Value and Mfs Massachusetts Municipal 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 Global Correlations module to find global opportunities by holding instruments from different markets.