Correlation Between American Funds and Mfs Lifetime

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

By analyzing existing cross correlation between American Funds Retirement and Mfs Lifetime 2065, you can compare the effects of market volatilities on American Funds and Mfs Lifetime 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 American Funds with a short position of Mfs Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Mfs Lifetime.

Diversification Opportunities for American Funds and Mfs Lifetime

0.9

Correlation Coefficient

American Funds  Mfs Lifetime

Almost no diversification

The 3 months correlation between American and Mfs is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Mfs Lifetime 2065 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Lifetime 2065 and American Funds 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 American Funds Retirement are associated (or correlated) with Mfs Lifetime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Lifetime 2065 has no effect on the direction of American Funds i.e., American Funds and Mfs Lifetime go up and down completely randomly.

Pair Corralation between American Funds and Mfs Lifetime

Assuming the 90 days horizon American Funds Retirement is expected to generate 0.62 times more return on investment than Mfs Lifetime. However, American Funds Retirement is 1.6 times less risky than Mfs Lifetime. It trades about 0.23 of its potential returns per unit of risk. Mfs Lifetime 2065 is currently generating about 0.12 per unit of risk. If you would invest  1,250  in American Funds Retirement on October 24, 2024 and sell it today you would earn a total of  24.00  from holding American Funds Retirement or generate 1.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	94.74%
Values	Daily Returns

American Funds Retirement  vs.  Mfs Lifetime 2065

American Funds Retirement

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Retirement are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs Lifetime 2065

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Lifetime 2065 are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Mfs Lifetime is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Funds and Mfs Lifetime

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

The idea behind American Funds Retirement and Mfs Lifetime 2065 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.