Correlation Between Princeton Capital and MFS High

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

By analyzing existing cross correlation between Princeton Capital and MFS High Income, you can compare the effects of market volatilities on Princeton Capital and MFS High 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 Princeton Capital with a short position of MFS High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Princeton Capital and MFS High.

Diversification Opportunities for Princeton Capital and MFS High

-0.26

Correlation Coefficient

Princeton Capital  MFS High

Very good diversification

The 3 months correlation between Princeton and MFS is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Princeton Capital and MFS High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS High Income and Princeton Capital 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 Princeton Capital are associated (or correlated) with MFS High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS High Income has no effect on the direction of Princeton Capital i.e., Princeton Capital and MFS High go up and down completely randomly.

Pair Corralation between Princeton Capital and MFS High

Given the investment horizon of 90 days Princeton Capital is expected to generate 1.03 times less return on investment than MFS High. In addition to that, Princeton Capital is 10.97 times more volatile than MFS High Income. It trades about 0.01 of its total potential returns per unit of risk. MFS High Income is currently generating about 0.1 per unit of volatility. If you would invest  317.00  in MFS High Income on September 15, 2024 and sell it today you would earn a total of  62.00  from holding MFS High Income or generate 19.56% return on investment over 90 days.

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

Princeton Capital  vs.  MFS High Income

Princeton Capital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Princeton Capital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Princeton Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

MFS High Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFS High Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, MFS High is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Princeton Capital and MFS High

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

The idea behind Princeton Capital and MFS High Income 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.