Correlation Between MFS High and Gabelli Multimedia

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

By analyzing existing cross correlation between MFS High Income and The Gabelli Multimedia, you can compare the effects of market volatilities on MFS High and Gabelli Multimedia 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 MFS High with a short position of Gabelli Multimedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS High and Gabelli Multimedia.

Diversification Opportunities for MFS High and Gabelli Multimedia

0.65

Correlation Coefficient

MFS High  Gabelli Multimedia

Poor diversification

The 3 months correlation between MFS and Gabelli is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding MFS High Income and The Gabelli Multimedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Gabelli Multimedia and MFS High 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 MFS High Income are associated (or correlated) with Gabelli Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Gabelli Multimedia has no effect on the direction of MFS High i.e., MFS High and Gabelli Multimedia go up and down completely randomly.

Pair Corralation between MFS High and Gabelli Multimedia

Considering the 90-day investment horizon MFS High is expected to generate 4.23 times less return on investment than Gabelli Multimedia. But when comparing it to its historical volatility, MFS High Income is 1.13 times less risky than Gabelli Multimedia. It trades about 0.02 of its potential returns per unit of risk. The Gabelli Multimedia is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,244  in The Gabelli Multimedia on September 4, 2024 and sell it today you would earn a total of  86.00  from holding The Gabelli Multimedia or generate 3.83% return on investment over 90 days.

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

MFS High Income  vs.  The Gabelli Multimedia

MFS High Income

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MFS High Income are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, MFS High is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

The Gabelli Multimedia

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Multimedia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Gabelli Multimedia is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MFS High and Gabelli Multimedia

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

The idea behind MFS High Income and The Gabelli Multimedia 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.