Correlation Between Sp Smallcap and Mfs Mid

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

By analyzing existing cross correlation between Sp Smallcap 600 and Mfs Mid Cap, you can compare the effects of market volatilities on Sp Smallcap and Mfs Mid 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 Sp Smallcap with a short position of Mfs Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Smallcap and Mfs Mid.

Diversification Opportunities for Sp Smallcap and Mfs Mid

0.63

Correlation Coefficient

Sp Smallcap  Mfs Mid

Poor diversification

The 3 months correlation between RYSVX and Mfs is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sp Smallcap 600 and Mfs Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Mid Cap and Sp Smallcap 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 Sp Smallcap 600 are associated (or correlated) with Mfs Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Mid Cap has no effect on the direction of Sp Smallcap i.e., Sp Smallcap and Mfs Mid go up and down completely randomly.

Pair Corralation between Sp Smallcap and Mfs Mid

Assuming the 90 days horizon Sp Smallcap is expected to generate 1.72 times less return on investment than Mfs Mid. In addition to that, Sp Smallcap is 1.48 times more volatile than Mfs Mid Cap. It trades about 0.02 of its total potential returns per unit of risk. Mfs Mid Cap is currently generating about 0.05 per unit of volatility. If you would invest  2,388  in Mfs Mid Cap on October 23, 2024 and sell it today you would earn a total of  548.00  from holding Mfs Mid Cap or generate 22.95% return on investment over 90 days.

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

Sp Smallcap 600  vs.  Mfs Mid Cap

Sp Smallcap 600

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sp Smallcap 600 are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Sp Smallcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sp Smallcap and Mfs Mid

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

The idea behind Sp Smallcap 600 and Mfs Mid Cap 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.