Correlation Between Return Stacked and MFS Government

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

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

Diversification Opportunities for Return Stacked and MFS Government

0.73

Correlation Coefficient

Return Stacked  MFS Government

Poor diversification

The 3 months correlation between Return and MFS is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Return Stacked Bonds 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 Return Stacked 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 Return Stacked Bonds 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 Return Stacked i.e., Return Stacked and MFS Government go up and down completely randomly.

Pair Corralation between Return Stacked and MFS Government

Given the investment horizon of 90 days Return Stacked is expected to generate 1.0 times less return on investment than MFS Government. But when comparing it to its historical volatility, Return Stacked Bonds is 1.57 times less risky than MFS Government. It trades about 0.09 of its potential returns per unit of risk. MFS Government Markets is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  303.00  in MFS Government Markets on January 26, 2025 and sell it today you would earn a total of  7.00  from holding MFS Government Markets or generate 2.31% return on investment over 90 days.

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

Return Stacked Bonds  vs.  MFS Government Markets

Return Stacked Bonds

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Return Stacked Bonds are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Return Stacked is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

MFS Government Markets

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Government Markets are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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 Return Stacked and MFS Government

The main advantage of trading using opposite Return Stacked and MFS Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Return Stacked 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 Return Stacked Bonds 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.