Correlation Between California Municipal and Mfs Limited

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

By analyzing existing cross correlation between California Municipal Portfolio and Mfs Limited Maturity, you can compare the effects of market volatilities on California Municipal and Mfs Limited 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 California Municipal with a short position of Mfs Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Municipal and Mfs Limited.

Diversification Opportunities for California Municipal and Mfs Limited

0.2

Correlation Coefficient

California Municipal  Mfs Limited

Modest diversification

The 3 months correlation between California and Mfs is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding California Municipal Portfolio and Mfs Limited Maturity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Limited Maturity and California Municipal 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 California Municipal Portfolio are associated (or correlated) with Mfs Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Limited Maturity has no effect on the direction of California Municipal i.e., California Municipal and Mfs Limited go up and down completely randomly.

Pair Corralation between California Municipal and Mfs Limited

Assuming the 90 days horizon California Municipal Portfolio is expected to under-perform the Mfs Limited. In addition to that, California Municipal is 1.54 times more volatile than Mfs Limited Maturity. It trades about -0.02 of its total potential returns per unit of risk. Mfs Limited Maturity is currently generating about 0.19 per unit of volatility. If you would invest  581.00  in Mfs Limited Maturity on October 27, 2024 and sell it today you would earn a total of  2.00  from holding Mfs Limited Maturity or generate 0.34% return on investment over 90 days.

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

California Municipal Portfolio  vs.  Mfs Limited Maturity

California Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mfs Limited Maturity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Limited Maturity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Mfs Limited is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with California Municipal and Mfs Limited

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

The idea behind California Municipal Portfolio and Mfs Limited Maturity 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.