Correlation Between Visa and MFS Municipal

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

By analyzing existing cross correlation between Visa Class A and MFS Municipal Income, you can compare the effects of market volatilities on Visa and MFS Municipal 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 Visa with a short position of MFS Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and MFS Municipal.

Diversification Opportunities for Visa and MFS Municipal

0.83

Correlation Coefficient

Visa  MFS Municipal

Very poor diversification

The 3 months correlation between Visa and MFS is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and MFS Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Municipal Income and Visa 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 Visa Class A are associated (or correlated) with MFS Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Municipal Income has no effect on the direction of Visa i.e., Visa and MFS Municipal go up and down completely randomly.

Pair Corralation between Visa and MFS Municipal

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.45 times more return on investment than MFS Municipal. However, Visa is 1.45 times more volatile than MFS Municipal Income. It trades about 0.08 of its potential returns per unit of risk. MFS Municipal Income is currently generating about 0.02 per unit of risk. If you would invest  32,037  in Visa Class A on December 25, 2024 and sell it today you would earn a total of  1,529  from holding Visa Class A or generate 4.77% return on investment over 90 days.

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

Visa Class A  vs.  MFS Municipal Income

Visa Class A

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

MFS Municipal Income

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Municipal Income are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, MFS Municipal is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Visa and MFS Municipal

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

The idea behind Visa Class A and MFS Municipal Income 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.