Correlation Between Liberty All and MFS Investment

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

By analyzing existing cross correlation between Liberty All Star and MFS Investment Grade, you can compare the effects of market volatilities on Liberty All and MFS Investment 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 Liberty All with a short position of MFS Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty All and MFS Investment.

Diversification Opportunities for Liberty All and MFS Investment

0.07

Correlation Coefficient

Liberty All  MFS Investment

Significant diversification

The 3 months correlation between Liberty and MFS is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Liberty All Star and MFS Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Investment Grade and Liberty All 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 Liberty All Star are associated (or correlated) with MFS Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Investment Grade has no effect on the direction of Liberty All i.e., Liberty All and MFS Investment go up and down completely randomly.

Pair Corralation between Liberty All and MFS Investment

Considering the 90-day investment horizon Liberty All Star is expected to generate 2.09 times more return on investment than MFS Investment. However, Liberty All is 2.09 times more volatile than MFS Investment Grade. It trades about 0.18 of its potential returns per unit of risk. MFS Investment Grade is currently generating about 0.1 per unit of risk. If you would invest  526.00  in Liberty All Star on September 1, 2024 and sell it today you would earn a total of  61.00  from holding Liberty All Star or generate 11.6% return on investment over 90 days.

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

Liberty All Star  vs.  MFS Investment Grade

Liberty All Star

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty All Star are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly unfluctuating basic indicators, Liberty All may actually be approaching a critical reversion point that can send shares even higher in December 2024.

MFS Investment Grade

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Investment Grade are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, MFS Investment is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Liberty All and MFS Investment

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

The idea behind Liberty All Star and MFS Investment Grade 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 Transaction History module to view history of all your transactions and understand their impact on performance.