Correlation Between Capital Southwest and MFS Multimarket

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

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

Diversification Opportunities for Capital Southwest and MFS Multimarket

0.73

Correlation Coefficient

Capital Southwest  MFS Multimarket

Poor diversification

The 3 months correlation between Capital and MFS is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Capital Southwest and MFS Multimarket Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Multimarket Income and Capital Southwest 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 Capital Southwest are associated (or correlated) with MFS Multimarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Multimarket Income has no effect on the direction of Capital Southwest i.e., Capital Southwest and MFS Multimarket go up and down completely randomly.

Pair Corralation between Capital Southwest and MFS Multimarket

Given the investment horizon of 90 days Capital Southwest is expected to generate 3.65 times more return on investment than MFS Multimarket. However, Capital Southwest is 3.65 times more volatile than MFS Multimarket Income. It trades about 0.21 of its potential returns per unit of risk. MFS Multimarket Income is currently generating about 0.13 per unit of risk. If you would invest  1,961  in Capital Southwest on April 30, 2025 and sell it today you would earn a total of  310.00  from holding Capital Southwest or generate 15.81% return on investment over 90 days.

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

Capital Southwest  vs.  MFS Multimarket Income

Capital Southwest

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Southwest are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Capital Southwest exhibited solid returns over the last few months and may actually be approaching a breakup point.

MFS Multimarket Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Multimarket Income are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, MFS Multimarket is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Capital Southwest and MFS Multimarket

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

The idea behind Capital Southwest and MFS Multimarket 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.