Correlation Between MFS Investment and Princeton Capital

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

Diversification Opportunities for MFS Investment and Princeton Capital

-0.48

Correlation Coefficient

MFS Investment  Princeton Capital

Very good diversification

The 3 months correlation between MFS and Princeton is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and Princeton Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Princeton Capital 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 Princeton Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Princeton Capital has no effect on the direction of MFS Investment i.e., MFS Investment and Princeton Capital go up and down completely randomly.

Pair Corralation between MFS Investment and Princeton Capital

Considering the 90-day investment horizon MFS Investment Grade is expected to generate 0.06 times more return on investment than Princeton Capital. However, MFS Investment Grade is 16.96 times less risky than Princeton Capital. It trades about 0.2 of its potential returns per unit of risk. Princeton Capital is currently generating about 0.0 per unit of risk. If you would invest  735.00  in MFS Investment Grade on August 30, 2024 and sell it today you would earn a total of  86.00  from holding MFS Investment Grade or generate 11.7% return on investment over 90 days.

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

MFS Investment Grade  vs.  Princeton Capital

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.

Princeton Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Princeton Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with MFS Investment and Princeton Capital

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

The idea behind MFS Investment Grade and Princeton Capital 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.