Correlation Between Mfs Growth and Power Momentum

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

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

Diversification Opportunities for Mfs Growth and Power Momentum

0.63

Correlation Coefficient

Mfs Growth  Power Momentum

Poor diversification

The 3 months correlation between Mfs and Power is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Growth Fund and Power Momentum Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Momentum Index and Mfs Growth 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 Growth Fund are associated (or correlated) with Power Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Momentum Index has no effect on the direction of Mfs Growth i.e., Mfs Growth and Power Momentum go up and down completely randomly.

Pair Corralation between Mfs Growth and Power Momentum

Assuming the 90 days horizon Mfs Growth Fund is expected to generate 1.09 times more return on investment than Power Momentum. However, Mfs Growth is 1.09 times more volatile than Power Momentum Index. It trades about 0.34 of its potential returns per unit of risk. Power Momentum Index is currently generating about 0.28 per unit of risk. If you would invest  16,805  in Mfs Growth Fund on April 29, 2025 and sell it today you would earn a total of  3,281  from holding Mfs Growth Fund or generate 19.52% return on investment over 90 days.

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

Mfs Growth Fund  vs.  Power Momentum Index

Mfs Growth Fund

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Growth Fund are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Mfs Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Power Momentum Index

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Power Momentum Index are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Power Momentum showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mfs Growth and Power Momentum

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

The idea behind Mfs Growth Fund and Power Momentum Index 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.