Correlation Between Verizon Communications and Mfs Municipal

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

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

Diversification Opportunities for Verizon Communications and Mfs Municipal

0.19

Correlation Coefficient

Verizon Communications  Mfs Municipal

Average diversification

The 3 months correlation between Verizon and Mfs is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications 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 Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Mfs Municipal go up and down completely randomly.

Pair Corralation between Verizon Communications and Mfs Municipal

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 4.03 times more return on investment than Mfs Municipal. However, Verizon Communications is 4.03 times more volatile than Mfs Municipal Income. It trades about 0.13 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  3,909  in Verizon Communications on December 24, 2024 and sell it today you would earn a total of  447.00  from holding Verizon Communications or generate 11.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Verizon Communications  vs.  Mfs Municipal Income

Verizon Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Verizon Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Mfs Municipal Income

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Verizon Communications and Mfs Municipal

The main advantage of trading using opposite Verizon Communications and Mfs Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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 Verizon Communications 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.