Correlation Between Vanguard Long and MFS Active

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

By analyzing existing cross correlation between Vanguard Long Term Treasury and MFS Active Core, you can compare the effects of market volatilities on Vanguard Long and MFS Active 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 Vanguard Long with a short position of MFS Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Long and MFS Active.

Diversification Opportunities for Vanguard Long and MFS Active

0.97

Correlation Coefficient

Vanguard Long  MFS Active

Almost no diversification

The 3 months correlation between Vanguard and MFS is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Long Term Treasury and MFS Active Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Active Core and Vanguard Long 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 Vanguard Long Term Treasury are associated (or correlated) with MFS Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Active Core has no effect on the direction of Vanguard Long i.e., Vanguard Long and MFS Active go up and down completely randomly.

Pair Corralation between Vanguard Long and MFS Active

Given the investment horizon of 90 days Vanguard Long Term Treasury is expected to generate 2.53 times more return on investment than MFS Active. However, Vanguard Long is 2.53 times more volatile than MFS Active Core. It trades about 0.11 of its potential returns per unit of risk. MFS Active Core is currently generating about 0.15 per unit of risk. If you would invest  5,516  in Vanguard Long Term Treasury on December 19, 2024 and sell it today you would earn a total of  245.00  from holding Vanguard Long Term Treasury or generate 4.44% return on investment over 90 days.

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

Vanguard Long Term Treasury  vs.  MFS Active Core

Vanguard Long Term

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Long Term Treasury are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Vanguard Long is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

MFS Active Core

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Active Core are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MFS Active is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Long and MFS Active

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

The idea behind Vanguard Long Term Treasury and MFS Active Core 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.