Correlation Between Red Oak and Mfs Technology

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

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

Diversification Opportunities for Red Oak and Mfs Technology

0.94

Correlation Coefficient

Red Oak  Mfs Technology

Almost no diversification

The 3 months correlation between Red and Mfs is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Red Oak Technology and Mfs Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Technology and Red Oak 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 Red Oak Technology are associated (or correlated) with Mfs Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Technology has no effect on the direction of Red Oak i.e., Red Oak and Mfs Technology go up and down completely randomly.

Pair Corralation between Red Oak and Mfs Technology

Assuming the 90 days horizon Red Oak is expected to generate 1.99 times less return on investment than Mfs Technology. In addition to that, Red Oak is 1.0 times more volatile than Mfs Technology Fund. It trades about 0.1 of its total potential returns per unit of risk. Mfs Technology Fund is currently generating about 0.2 per unit of volatility. If you would invest  4,926  in Mfs Technology Fund on September 5, 2024 and sell it today you would earn a total of  466.00  from holding Mfs Technology Fund or generate 9.46% return on investment over 90 days.

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

Red Oak Technology  vs.  Mfs Technology Fund

Red Oak Technology

Risk-Adjusted Performance

11 of 100

OK

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

Mfs Technology

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Technology Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Mfs Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red Oak and Mfs Technology

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

The idea behind Red Oak Technology and Mfs Technology 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.