Correlation Between American Mutual and Mfs Diversified

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

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

Diversification Opportunities for American Mutual and Mfs Diversified

0.69

Correlation Coefficient

American Mutual  Mfs Diversified

Poor diversification

The 3 months correlation between American and Mfs is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Mfs Diversified Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Diversified Income and American Mutual 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 American Mutual Fund are associated (or correlated) with Mfs Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Diversified Income has no effect on the direction of American Mutual i.e., American Mutual and Mfs Diversified go up and down completely randomly.

Pair Corralation between American Mutual and Mfs Diversified

Assuming the 90 days horizon American Mutual Fund is expected to under-perform the Mfs Diversified. In addition to that, American Mutual is 3.61 times more volatile than Mfs Diversified Income. It trades about -0.28 of its total potential returns per unit of risk. Mfs Diversified Income is currently generating about -0.28 per unit of volatility. If you would invest  1,237  in Mfs Diversified Income on September 28, 2024 and sell it today you would lose (27.00) from holding Mfs Diversified Income or give up 2.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

American Mutual Fund  vs.  Mfs Diversified Income

American Mutual

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mfs Diversified Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with American Mutual and Mfs Diversified

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

The idea behind American Mutual Fund and Mfs Diversified 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.