Correlation Between Base Carbon and MFS Municipal

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

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

Diversification Opportunities for Base Carbon and MFS Municipal

0.85

Correlation Coefficient

Base Carbon  MFS Municipal

Very poor diversification

The 3 months correlation between Base and MFS is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Base Carbon and MFS Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Municipal Income and Base Carbon 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 Base Carbon are associated (or correlated) with MFS Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Municipal Income has no effect on the direction of Base Carbon i.e., Base Carbon and MFS Municipal go up and down completely randomly.

Pair Corralation between Base Carbon and MFS Municipal

Assuming the 90 days trading horizon Base Carbon is expected to generate 5.91 times more return on investment than MFS Municipal. However, Base Carbon is 5.91 times more volatile than MFS Municipal Income. It trades about 0.16 of its potential returns per unit of risk. MFS Municipal Income is currently generating about 0.17 per unit of risk. If you would invest  68.00  in Base Carbon on August 18, 2025 and sell it today you would earn a total of  28.00  from holding Base Carbon or generate 41.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Base Carbon  vs.  MFS Municipal Income

Base Carbon

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Base Carbon are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Base Carbon exhibited solid returns over the last few months and may actually be approaching a breakup point.

MFS Municipal Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Municipal Income are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, MFS Municipal may actually be approaching a critical reversion point that can send shares even higher in December 2025.

Pair Trading with Base Carbon and MFS Municipal

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

The idea behind Base Carbon and MFS Municipal 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.