Correlation Between Municipal Bond and Mfs Technology

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

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

Diversification Opportunities for Municipal Bond and Mfs Technology

-0.27

Correlation Coefficient

Municipal Bond  Mfs Technology

Very good diversification

The 3 months correlation between Municipal and Mfs is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Municipal Bond Portfolio and Mfs Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Technology and Municipal Bond 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 Municipal Bond Portfolio are associated (or correlated) with Mfs Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Technology has no effect on the direction of Municipal Bond i.e., Municipal Bond and Mfs Technology go up and down completely randomly.

Pair Corralation between Municipal Bond and Mfs Technology

Assuming the 90 days horizon Municipal Bond is expected to generate 11.47 times less return on investment than Mfs Technology. But when comparing it to its historical volatility, Municipal Bond Portfolio is 9.69 times less risky than Mfs Technology. It trades about 0.06 of its potential returns per unit of risk. Mfs Technology Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,246  in Mfs Technology Fund on September 14, 2024 and sell it today you would earn a total of  1,149  from holding Mfs Technology Fund or generate 27.06% return on investment over 90 days.

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

Municipal Bond Portfolio  vs.  Mfs Technology Fund

Municipal Bond Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mfs Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Technology Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Mfs Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Municipal Bond and Mfs Technology

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

The idea behind Municipal Bond Portfolio and Mfs Technology 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.