Correlation Between Baron Health and Mfs International

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

By analyzing existing cross correlation between Baron Health Care and Mfs International Large, you can compare the effects of market volatilities on Baron Health and Mfs International 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 Baron Health with a short position of Mfs International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baron Health and Mfs International.

Diversification Opportunities for Baron Health and Mfs International

0.73

Correlation Coefficient

Baron Health  Mfs International

Poor diversification

The 3 months correlation between Baron and Mfs is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Baron Health Care and Mfs International Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs International Large and Baron Health 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 Baron Health Care are associated (or correlated) with Mfs International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs International Large has no effect on the direction of Baron Health i.e., Baron Health and Mfs International go up and down completely randomly.

Pair Corralation between Baron Health and Mfs International

Assuming the 90 days horizon Baron Health Care is expected to under-perform the Mfs International. In addition to that, Baron Health is 1.17 times more volatile than Mfs International Large. It trades about -0.09 of its total potential returns per unit of risk. Mfs International Large is currently generating about -0.03 per unit of volatility. If you would invest  1,457  in Mfs International Large on September 12, 2024 and sell it today you would lose (22.00) from holding Mfs International Large or give up 1.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Baron Health Care  vs.  Mfs International Large

Baron Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mfs International Large

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Baron Health and Mfs International

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

The idea behind Baron Health Care and Mfs International Large 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.