Correlation Between Msift High and Select Equity

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

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

Diversification Opportunities for Msift High and Select Equity

0.92

Correlation Coefficient

Msift High  Select Equity

Almost no diversification

The 3 months correlation between Msift and Select is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Msift High Yield and Select Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Equity and Msift High 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 Msift High Yield are associated (or correlated) with Select Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Equity has no effect on the direction of Msift High i.e., Msift High and Select Equity go up and down completely randomly.

Pair Corralation between Msift High and Select Equity

Assuming the 90 days horizon Msift High is expected to generate 5.57 times less return on investment than Select Equity. But when comparing it to its historical volatility, Msift High Yield is 6.47 times less risky than Select Equity. It trades about 0.46 of its potential returns per unit of risk. Select Equity Fund is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  1,946  in Select Equity Fund on September 5, 2024 and sell it today you would earn a total of  135.00  from holding Select Equity Fund or generate 6.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Msift High Yield  vs.  Select Equity Fund

Msift High Yield

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Msift High Yield are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Msift High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Select Equity

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Select Equity Fund are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Select Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Msift High and Select Equity

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

The idea behind Msift High Yield and Select Equity 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.