Correlation Between Guidemark Large and Mfs Global

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

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

Diversification Opportunities for Guidemark Large and Mfs Global

-0.27

Correlation Coefficient

Guidemark Large  Mfs Global

Very good diversification

The 3 months correlation between Guidemark and Mfs is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Guidemark Large Cap and Mfs Global High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Global High and Guidemark Large 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 Guidemark Large Cap are associated (or correlated) with Mfs Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Global High has no effect on the direction of Guidemark Large i.e., Guidemark Large and Mfs Global go up and down completely randomly.

Pair Corralation between Guidemark Large and Mfs Global

Assuming the 90 days horizon Guidemark Large Cap is expected to generate 3.56 times more return on investment than Mfs Global. However, Guidemark Large is 3.56 times more volatile than Mfs Global High. It trades about 0.07 of its potential returns per unit of risk. Mfs Global High is currently generating about -0.16 per unit of risk. If you would invest  1,158  in Guidemark Large Cap on September 27, 2024 and sell it today you would earn a total of  10.00  from holding Guidemark Large Cap or generate 0.86% return on investment over 90 days.

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

Guidemark Large Cap  vs.  Mfs Global High

Guidemark Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guidemark Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Guidemark Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs Global High

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Guidemark Large and Mfs Global

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

The idea behind Guidemark Large Cap and Mfs Global High 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.