Correlation Between Entergy and Mfs Utilities

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

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

Diversification Opportunities for Entergy and Mfs Utilities

-0.32

Correlation Coefficient

Entergy  Mfs Utilities

Very good diversification

The 3 months correlation between Entergy and Mfs is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Entergy and Mfs Utilities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Utilities and Entergy 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 Entergy are associated (or correlated) with Mfs Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Utilities has no effect on the direction of Entergy i.e., Entergy and Mfs Utilities go up and down completely randomly.

Pair Corralation between Entergy and Mfs Utilities

Considering the 90-day investment horizon Entergy is expected to generate 2.4 times more return on investment than Mfs Utilities. However, Entergy is 2.4 times more volatile than Mfs Utilities Fund. It trades about 0.12 of its potential returns per unit of risk. Mfs Utilities Fund is currently generating about -0.1 per unit of risk. If you would invest  6,350  in Entergy on September 17, 2024 and sell it today you would earn a total of  1,074  from holding Entergy or generate 16.91% return on investment over 90 days.

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

Entergy  vs.  Mfs Utilities Fund

Entergy

Risk-Adjusted Performance

9 of 100

OK

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

Mfs Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mfs Utilities Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Mfs Utilities is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Entergy and Mfs Utilities

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

The idea behind Entergy and Mfs Utilities Fund 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.