Correlation Between Old Westbury and Mfs Corporate

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

By analyzing existing cross correlation between Old Westbury Municipal and Mfs Porate Bond, you can compare the effects of market volatilities on Old Westbury and Mfs Corporate 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 Old Westbury with a short position of Mfs Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Westbury and Mfs Corporate.

Diversification Opportunities for Old Westbury and Mfs Corporate

0.91

Correlation Coefficient

Old Westbury  Mfs Corporate

Almost no diversification

The 3 months correlation between Old and Mfs is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Old Westbury Municipal and Mfs Porate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Porate Bond and Old Westbury 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 Old Westbury Municipal are associated (or correlated) with Mfs Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Porate Bond has no effect on the direction of Old Westbury i.e., Old Westbury and Mfs Corporate go up and down completely randomly.

Pair Corralation between Old Westbury and Mfs Corporate

Assuming the 90 days horizon Old Westbury is expected to generate 1.34 times less return on investment than Mfs Corporate. But when comparing it to its historical volatility, Old Westbury Municipal is 2.0 times less risky than Mfs Corporate. It trades about 0.13 of its potential returns per unit of risk. Mfs Porate Bond is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,207  in Mfs Porate Bond on September 3, 2024 and sell it today you would earn a total of  44.00  from holding Mfs Porate Bond or generate 3.65% return on investment over 90 days.

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

Old Westbury Municipal  vs.  Mfs Porate Bond

Old Westbury Municipal

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Old Westbury Municipal are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Old Westbury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs Porate Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Old Westbury and Mfs Corporate

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

The idea behind Old Westbury Municipal and Mfs Porate Bond 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.