Correlation Between MFS Investment and Federated Premier

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

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

Diversification Opportunities for MFS Investment and Federated Premier

0.74

Correlation Coefficient

MFS Investment  Federated Premier

Poor diversification

The 3 months correlation between MFS and Federated is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and Federated Premier Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Premier and MFS Investment 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 Investment Grade are associated (or correlated) with Federated Premier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Premier has no effect on the direction of MFS Investment i.e., MFS Investment and Federated Premier go up and down completely randomly.

Pair Corralation between MFS Investment and Federated Premier

Considering the 90-day investment horizon MFS Investment Grade is expected to under-perform the Federated Premier. But the stock apears to be less risky and, when comparing its historical volatility, MFS Investment Grade is 1.09 times less risky than Federated Premier. The stock trades about -0.06 of its potential returns per unit of risk. The Federated Premier Municipal is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,051  in Federated Premier Municipal on May 3, 2025 and sell it today you would earn a total of  6.00  from holding Federated Premier Municipal or generate 0.57% return on investment over 90 days.

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

MFS Investment Grade  vs.  Federated Premier Municipal

MFS Investment Grade

Risk-Adjusted Performance

Very Weak

Over the last 90 days MFS Investment Grade has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, MFS Investment is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Federated Premier

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Premier Municipal are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy primary indicators, Federated Premier is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with MFS Investment and Federated Premier

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

The idea behind MFS Investment Grade and Federated Premier Municipal 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.