Correlation Between MFS High and MFS Intermediate

Can any of the company-specific risk be diversified away by investing in both MFS High and MFS Intermediate 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 MFS Intermediate 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 MFS Intermediate Income, you can compare the effects of market volatilities on MFS High and MFS Intermediate 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 MFS Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS High and MFS Intermediate.

Diversification Opportunities for MFS High and MFS Intermediate

0.33

Correlation Coefficient

MFS High  MFS Intermediate

Weak diversification

The 3 months correlation between MFS and MFS is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding MFS High Income and MFS Intermediate Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Intermediate Income 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 MFS Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Intermediate Income has no effect on the direction of MFS High i.e., MFS High and MFS Intermediate go up and down completely randomly.

Pair Corralation between MFS High and MFS Intermediate

Considering the 90-day investment horizon MFS High Income is expected to generate 1.05 times more return on investment than MFS Intermediate. However, MFS High is 1.05 times more volatile than MFS Intermediate Income. It trades about 0.02 of its potential returns per unit of risk. MFS Intermediate Income is currently generating about 0.0 per unit of risk. If you would invest  385.00  in MFS High Income on September 3, 2024 and sell it today you would earn a total of  3.00  from holding MFS High Income or generate 0.78% return on investment over 90 days.

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

MFS High Income  vs.  MFS Intermediate Income

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.

MFS Intermediate Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS Intermediate Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, MFS Intermediate is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MFS High and MFS Intermediate

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

The idea behind MFS High Income and MFS Intermediate 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.