Correlation Between MFS Multimarket and MFS Government

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

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

Diversification Opportunities for MFS Multimarket and MFS Government

0.66

Correlation Coefficient

MFS Multimarket  MFS Government

Poor diversification

The 3 months correlation between MFS and MFS is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding MFS Multimarket Income and MFS Government Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS Government Markets and MFS Multimarket 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 Multimarket Income are associated (or correlated) with MFS Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS Government Markets has no effect on the direction of MFS Multimarket i.e., MFS Multimarket and MFS Government go up and down completely randomly.

Pair Corralation between MFS Multimarket and MFS Government

Considering the 90-day investment horizon MFS Multimarket Income is expected to generate 0.5 times more return on investment than MFS Government. However, MFS Multimarket Income is 2.0 times less risky than MFS Government. It trades about 0.13 of its potential returns per unit of risk. MFS Government Markets is currently generating about 0.0 per unit of risk. If you would invest  451.00  in MFS Multimarket Income on April 30, 2025 and sell it today you would earn a total of  12.00  from holding MFS Multimarket Income or generate 2.66% return on investment over 90 days.

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

MFS Multimarket Income  vs.  MFS Government Markets

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.

MFS Government Markets

Risk-Adjusted Performance

Very Weak

Over the last 90 days MFS Government Markets has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, MFS Government is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MFS Multimarket and MFS Government

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

The idea behind MFS Multimarket Income and MFS Government Markets 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.