Correlation Between Mfs Government and Fabxx

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

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

Diversification Opportunities for Mfs Government and Fabxx

0.28

Correlation Coefficient

Mfs Government  Fabxx

Modest diversification

The 3 months correlation between Mfs and Fabxx is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Government Securities and Fabxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabxx and Mfs Government 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 Government Securities are associated (or correlated) with Fabxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fabxx has no effect on the direction of Mfs Government i.e., Mfs Government and Fabxx go up and down completely randomly.

Pair Corralation between Mfs Government and Fabxx

Assuming the 90 days horizon Mfs Government Securities is expected to generate 0.07 times more return on investment than Fabxx. However, Mfs Government Securities is 13.88 times less risky than Fabxx. It trades about -0.09 of its potential returns per unit of risk. Fabxx is currently generating about -0.01 per unit of risk. If you would invest  877.00  in Mfs Government Securities on September 4, 2024 and sell it today you would lose (15.00) from holding Mfs Government Securities or give up 1.71% of portfolio value over 90 days.

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

Mfs Government Securities  vs.  Fabxx

Mfs Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fabxx

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mfs Government and Fabxx

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

The idea behind Mfs Government Securities and Fabxx 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.