Correlation Between Madison Diversified and Mfs Series

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

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

Diversification Opportunities for Madison Diversified and Mfs Series

0.85

Correlation Coefficient

Madison Diversified  Mfs Series

Very poor diversification

The 3 months correlation between Madison and Mfs is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Madison Diversified Income and Mfs Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Series Trust and Madison Diversified 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 Madison Diversified Income are associated (or correlated) with Mfs Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Series Trust has no effect on the direction of Madison Diversified i.e., Madison Diversified and Mfs Series go up and down completely randomly.

Pair Corralation between Madison Diversified and Mfs Series

Assuming the 90 days horizon Madison Diversified is expected to generate 2.6 times less return on investment than Mfs Series. But when comparing it to its historical volatility, Madison Diversified Income is 2.72 times less risky than Mfs Series. It trades about 0.1 of its potential returns per unit of risk. Mfs Series Trust is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,129  in Mfs Series Trust on September 12, 2024 and sell it today you would earn a total of  42.00  from holding Mfs Series Trust or generate 3.72% return on investment over 90 days.

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

Madison Diversified Income  vs.  Mfs Series Trust

Madison Diversified

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Diversified Income are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Madison Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs Series Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Series Trust are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Mfs Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Madison Diversified and Mfs Series

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

The idea behind Madison Diversified Income and Mfs Series Trust 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.