Correlation Between Sierra E and Mfs International

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

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

Diversification Opportunities for Sierra E and Mfs International

-0.05

Correlation Coefficient

Sierra E  Mfs International

Good diversification

The 3 months correlation between Sierra and Mfs is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Mfs International Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs International Large and Sierra E 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 Sierra E Retirement are associated (or correlated) with Mfs International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs International Large has no effect on the direction of Sierra E i.e., Sierra E and Mfs International go up and down completely randomly.

Pair Corralation between Sierra E and Mfs International

Assuming the 90 days horizon Sierra E Retirement is expected to under-perform the Mfs International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sierra E Retirement is 1.98 times less risky than Mfs International. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Mfs International Large is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,298  in Mfs International Large on December 20, 2024 and sell it today you would earn a total of  188.00  from holding Mfs International Large or generate 14.48% return on investment over 90 days.

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

Sierra E Retirement  vs.  Mfs International Large

Sierra E Retirement

Risk-Adjusted Performance

Very Weak

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

Mfs International Large

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs International Large are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Mfs International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sierra E and Mfs International

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

The idea behind Sierra E Retirement and Mfs International Large 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.