Correlation Between MFS Investment and CBH

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

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

Diversification Opportunities for MFS Investment and CBH

0.04

Correlation Coefficient

MFS Investment  CBH

Significant diversification

The 3 months correlation between MFS and CBH is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and CBH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBH and MFS Investment 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 Investment Grade are associated (or correlated) with CBH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBH has no effect on the direction of MFS Investment i.e., MFS Investment and CBH go up and down completely randomly.

Pair Corralation between MFS Investment and CBH

Considering the 90-day investment horizon MFS Investment is expected to generate 1285.03 times less return on investment than CBH. But when comparing it to its historical volatility, MFS Investment Grade is 142.55 times less risky than CBH. It trades about 0.08 of its potential returns per unit of risk. CBH is currently generating about 0.71 of returns per unit of risk over similar time horizon. If you would invest  919.00  in CBH on August 30, 2024 and sell it today you would earn a total of  855.00  from holding CBH or generate 93.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	3.17%
Values	Daily Returns

MFS Investment Grade  vs.  CBH

MFS Investment Grade

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Investment Grade are ranked lower than 6 (%) 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 current stock price confusion, may contribute to short-horizon losses for the traders.

CBH

Risk-Adjusted Performance

0 of 100

Excellent

Over the last 90 days CBH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly uncertain fundamental drivers, CBH demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MFS Investment and CBH

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

The idea behind MFS Investment Grade and CBH 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.