Correlation Between Inverse Dow and Mfs Intermediate

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

By analyzing existing cross correlation between Inverse Dow 2x and Mfs Intermediate High, you can compare the effects of market volatilities on Inverse Dow and Mfs Intermediate 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 Inverse Dow with a short position of Mfs Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Dow and Mfs Intermediate.

Diversification Opportunities for Inverse Dow and Mfs Intermediate

-0.83

Correlation Coefficient

Inverse Dow  Mfs Intermediate

Pay attention - limited upside

The 3 months correlation between Inverse and Mfs is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Dow 2x and Mfs Intermediate High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Intermediate High and Inverse Dow 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 Inverse Dow 2x are associated (or correlated) with Mfs Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Intermediate High has no effect on the direction of Inverse Dow i.e., Inverse Dow and Mfs Intermediate go up and down completely randomly.

Pair Corralation between Inverse Dow and Mfs Intermediate

Assuming the 90 days horizon Inverse Dow 2x is expected to under-perform the Mfs Intermediate. In addition to that, Inverse Dow is 2.52 times more volatile than Mfs Intermediate High. It trades about -0.22 of its total potential returns per unit of risk. Mfs Intermediate High is currently generating about 0.28 per unit of volatility. If you would invest  162.00  in Mfs Intermediate High on February 15, 2025 and sell it today you would earn a total of  9.00  from holding Mfs Intermediate High or generate 5.56% return on investment over 90 days.

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

Inverse Dow 2x  vs.  Mfs Intermediate High

Inverse Dow 2x

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Dow 2x are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Inverse Dow may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Mfs Intermediate High

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Intermediate High are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable forward indicators, Mfs Intermediate is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Inverse Dow and Mfs Intermediate

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

The idea behind Inverse Dow 2x and Mfs Intermediate High 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.