Correlation Between MFS High and Urbana

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

Diversification Opportunities for MFS High and Urbana

-0.42

Correlation Coefficient

MFS High  Urbana

Very good diversification

The 3 months correlation between MFS and Urbana is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding MFS High Income and Urbana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Urbana 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 Urbana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Urbana has no effect on the direction of MFS High i.e., MFS High and Urbana go up and down completely randomly.

Pair Corralation between MFS High and Urbana

Considering the 90-day investment horizon MFS High is expected to generate 1.3 times less return on investment than Urbana. But when comparing it to its historical volatility, MFS High Income is 2.28 times less risky than Urbana. It trades about 0.1 of its potential returns per unit of risk. Urbana is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  347.00  in Urbana on September 15, 2024 and sell it today you would earn a total of  75.00  from holding Urbana or generate 21.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.17%
Values	Daily Returns

MFS High Income  vs.  Urbana

MFS High Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS High Income has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Urbana

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Urbana are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Urbana reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MFS High and Urbana

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

The idea behind MFS High Income and Urbana 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.