Correlation Between PGIM Short and MFS Government

Can any of the company-specific risk be diversified away by investing in both PGIM Short and MFS Government 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 PGIM Short and MFS Government into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PGIM Short Duration and MFS Government Markets, you can compare the effects of market volatilities on PGIM Short and MFS Government 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 PGIM Short with a short position of MFS Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGIM Short and MFS Government.

Diversification Opportunities for PGIM Short and MFS Government

-0.24

Correlation Coefficient

PGIM Short  MFS Government

Very good diversification

The 3 months correlation between PGIM and MFS is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding PGIM Short Duration and MFS Government Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Government Markets and PGIM Short 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 PGIM Short Duration are associated (or correlated) with MFS Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Government Markets has no effect on the direction of PGIM Short i.e., PGIM Short and MFS Government go up and down completely randomly.

Pair Corralation between PGIM Short and MFS Government

Given the investment horizon of 90 days PGIM Short Duration is expected to under-perform the MFS Government. But the stock apears to be less risky and, when comparing its historical volatility, PGIM Short Duration is 1.96 times less risky than MFS Government. The stock trades about -0.17 of its potential returns per unit of risk. The MFS Government Markets is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  307.00  in MFS Government Markets on September 23, 2024 and sell it today you would earn a total of  3.00  from holding MFS Government Markets or generate 0.98% return on investment over 90 days.

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

PGIM Short Duration  vs.  MFS Government Markets

PGIM Short Duration

Risk-Adjusted Performance

1 of 100

Weak

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

MFS Government Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS Government Markets has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, MFS Government is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PGIM Short and MFS Government

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

The idea behind PGIM Short Duration and MFS Government Markets 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.