Correlation Between First Trust and MFS Active

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

By analyzing existing cross correlation between First Trust Exchange Traded and MFS Active Core, you can compare the effects of market volatilities on First Trust and MFS Active 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 First Trust with a short position of MFS Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and MFS Active.

Diversification Opportunities for First Trust and MFS Active

0.83

Correlation Coefficient

First Trust  MFS Active

Very poor diversification

The 3 months correlation between First and MFS is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and MFS Active Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Active Core and First Trust 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 First Trust Exchange Traded are associated (or correlated) with MFS Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Active Core has no effect on the direction of First Trust i.e., First Trust and MFS Active go up and down completely randomly.

Pair Corralation between First Trust and MFS Active

Given the investment horizon of 90 days First Trust Exchange Traded is expected to under-perform the MFS Active. In addition to that, First Trust is 1.38 times more volatile than MFS Active Core. It trades about 0.0 of its total potential returns per unit of risk. MFS Active Core is currently generating about 0.07 per unit of volatility. If you would invest  2,457  in MFS Active Core on April 29, 2025 and sell it today you would earn a total of  30.00  from holding MFS Active Core or generate 1.22% return on investment over 90 days.

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

First Trust Exchange Traded  vs.  MFS Active Core

First Trust Exchange

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, First Trust is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

MFS Active Core

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Active Core are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MFS Active is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Trust and MFS Active

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

The idea behind First Trust Exchange Traded and MFS Active Core 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.