Correlation Between MFS Investment and Westwood Holdings

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

Diversification Opportunities for MFS Investment and Westwood Holdings

-0.02

Correlation Coefficient

MFS Investment  Westwood Holdings

Good diversification

The 3 months correlation between MFS and Westwood is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and Westwood Holdings Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Holdings 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 Westwood Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Holdings has no effect on the direction of MFS Investment i.e., MFS Investment and Westwood Holdings go up and down completely randomly.

Pair Corralation between MFS Investment and Westwood Holdings

Considering the 90-day investment horizon MFS Investment Grade is expected to generate 0.2 times more return on investment than Westwood Holdings. However, MFS Investment Grade is 4.91 times less risky than Westwood Holdings. It trades about 0.45 of its potential returns per unit of risk. Westwood Holdings Group is currently generating about 0.05 per unit of risk. If you would invest  802.00  in MFS Investment Grade on September 13, 2024 and sell it today you would earn a total of  31.00  from holding MFS Investment Grade or generate 3.87% return on investment over 90 days.

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

MFS Investment Grade  vs.  Westwood Holdings Group

MFS Investment Grade

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Investment Grade are ranked lower than 4 (%) 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.

Westwood Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westwood Holdings Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical indicators, Westwood Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MFS Investment and Westwood Holdings

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

The idea behind MFS Investment Grade and Westwood Holdings Group 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.