Correlation Between Eaton Vance and MFS Municipal

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

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

Diversification Opportunities for Eaton Vance and MFS Municipal

0.57

Correlation Coefficient

Eaton Vance  MFS Municipal

Very weak diversification

The 3 months correlation between Eaton and MFS is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Municipal and MFS Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Municipal Income and Eaton Vance 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 Eaton Vance Municipal are associated (or correlated) with MFS Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Municipal Income has no effect on the direction of Eaton Vance i.e., Eaton Vance and MFS Municipal go up and down completely randomly.

Pair Corralation between Eaton Vance and MFS Municipal

Considering the 90-day investment horizon Eaton Vance Municipal is expected to generate 0.54 times more return on investment than MFS Municipal. However, Eaton Vance Municipal is 1.85 times less risky than MFS Municipal. It trades about -0.05 of its potential returns per unit of risk. MFS Municipal Income is currently generating about -0.16 per unit of risk. If you would invest  1,813  in Eaton Vance Municipal on September 21, 2024 and sell it today you would lose (7.00) from holding Eaton Vance Municipal or give up 0.39% of portfolio value over 90 days.

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

Eaton Vance Municipal  vs.  MFS Municipal Income

Eaton Vance Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaton Vance Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Eaton Vance is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

MFS Municipal Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS Municipal Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, MFS Municipal is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Eaton Vance and MFS Municipal

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

The idea behind Eaton Vance Municipal and MFS Municipal Income 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.