Correlation Between Health Biotchnology and Mfs Utilities

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

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

Diversification Opportunities for Health Biotchnology and Mfs Utilities

-0.24

Correlation Coefficient

Health Biotchnology  Mfs Utilities

Very good diversification

The 3 months correlation between Health and Mfs is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Health Biotchnology Portfolio and Mfs Utilities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Utilities and Health Biotchnology 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 Health Biotchnology Portfolio are associated (or correlated) with Mfs Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Utilities has no effect on the direction of Health Biotchnology i.e., Health Biotchnology and Mfs Utilities go up and down completely randomly.

Pair Corralation between Health Biotchnology and Mfs Utilities

Assuming the 90 days horizon Health Biotchnology Portfolio is expected to under-perform the Mfs Utilities. But the mutual fund apears to be less risky and, when comparing its historical volatility, Health Biotchnology Portfolio is 1.19 times less risky than Mfs Utilities. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Mfs Utilities Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,360  in Mfs Utilities Fund on September 5, 2024 and sell it today you would earn a total of  60.00  from holding Mfs Utilities Fund or generate 2.54% return on investment over 90 days.

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

Health Biotchnology Portfolio  vs.  Mfs Utilities Fund

Health Biotchnology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mfs Utilities

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Utilities Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mfs Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Health Biotchnology and Mfs Utilities

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

The idea behind Health Biotchnology Portfolio and Mfs Utilities 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.