Correlation Between Mfs Value and Northern Large
Can any of the company-specific risk be diversified away by investing in both Mfs Value and Northern Large 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 Mfs Value and Northern Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mfs Value Fund and Northern Large Cap, you can compare the effects of market volatilities on Mfs Value and Northern Large 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 Mfs Value with a short position of Northern Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs Value and Northern Large.
Diversification Opportunities for Mfs Value and Northern Large
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mfs and Northern is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Value Fund and Northern Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Large Cap and Mfs Value 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 Mfs Value Fund are associated (or correlated) with Northern Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Large Cap has no effect on the direction of Mfs Value i.e., Mfs Value and Northern Large go up and down completely randomly.
Pair Corralation between Mfs Value and Northern Large
Assuming the 90 days horizon Mfs Value Fund is expected to under-perform the Northern Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Mfs Value Fund is 1.18 times less risky than Northern Large. The mutual fund trades about -0.27 of its potential returns per unit of risk. The Northern Large Cap is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest 2,097 in Northern Large Cap on January 20, 2024 and sell it today you would lose (71.00) from holding Northern Large Cap or give up 3.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mfs Value Fund vs. Northern Large Cap
Performance |
| Timeline |
| Mfs Value Fund |
| Northern Large Cap |
Mfs Value and Northern Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mfs Value and Northern Large
The main advantage of trading using opposite Mfs Value and Northern Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mfs Value position performs unexpectedly, Northern Large 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 Northern Large will offset losses from the drop in Northern Large's long position.| Mfs Value vs. Mfs Prudent Investor | Mfs Value vs. Mfs Prudent Investor | Mfs Value vs. Mfs Prudent Investor | Mfs Value vs. Mfs Prudent Investor |
| Northern Large vs. Northern Bond Index | Northern Large vs. Northern E Bond | Northern Large vs. Northern Arizona Tax Exempt | Northern Large vs. Northern Emerging Markets |
Check out your portfolio center.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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