Correlation Between MFS Municipal and MFS Investment
Can any of the company-specific risk be diversified away by investing in both MFS Municipal and MFS Investment 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 Municipal and MFS Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFS Municipal Income and MFS Investment Grade, you can compare the effects of market volatilities on MFS Municipal and MFS Investment 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 Municipal with a short position of MFS Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS Municipal and MFS Investment.
Diversification Opportunities for MFS Municipal and MFS Investment
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MFS and MFS is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding MFS Municipal Income and MFS Investment Grade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Investment Grade and MFS Municipal 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 Municipal Income are associated (or correlated) with MFS Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Investment Grade has no effect on the direction of MFS Municipal i.e., MFS Municipal and MFS Investment go up and down completely randomly.
Pair Corralation between MFS Municipal and MFS Investment
Considering the 90-day investment horizon MFS Municipal Income is expected to generate 1.44 times more return on investment than MFS Investment. However, MFS Municipal is 1.44 times more volatile than MFS Investment Grade. It trades about 0.0 of its potential returns per unit of risk. MFS Investment Grade is currently generating about -0.08 per unit of risk. If you would invest 508.00 in MFS Municipal Income on April 29, 2025 and sell it today you would lose (1.00) from holding MFS Municipal Income or give up 0.2% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
MFS Municipal Income vs. MFS Investment Grade
Performance |
Timeline |
MFS Municipal Income |
MFS Investment Grade |
MFS Municipal and MFS Investment Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MFS Municipal and MFS Investment
The main advantage of trading using opposite MFS Municipal and MFS Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFS Municipal position performs unexpectedly, MFS Investment 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 Investment will offset losses from the drop in MFS Investment's long position.MFS Municipal vs. MFS Investment Grade | MFS Municipal vs. Eaton Vance National | MFS Municipal vs. Blackrock Munivest | MFS Municipal vs. DTF Tax Free |
MFS Investment vs. MFS High Yield | MFS Investment vs. MFS High Income | MFS Investment vs. DTF Tax Free | MFS Investment vs. Eaton Vance National |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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