Correlation Between American Mutual and Mfs Value

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Can any of the company-specific risk be diversified away by investing in both American Mutual and Mfs Value 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 American Mutual and Mfs Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Mutual Fund and Mfs Value Fund, you can compare the effects of market volatilities on American Mutual and Mfs Value 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 American Mutual with a short position of Mfs Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Mfs Value.

Diversification Opportunities for American Mutual and Mfs Value

0.98
  Correlation Coefficient

Almost no diversification

The 3 months correlation between American and Mfs is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding AMERICAN MUTUAL FUND and MFS VALUE FUND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Value Fund and American Mutual 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 American Mutual Fund are associated (or correlated) with Mfs Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Value Fund has no effect on the direction of American Mutual i.e., American Mutual and Mfs Value go up and down completely randomly.

Pair Corralation between American Mutual and Mfs Value

Assuming the 90 days horizon American Mutual is expected to generate 1.26 times less return on investment than Mfs Value. But when comparing it to its historical volatility, American Mutual Fund is 1.04 times less risky than Mfs Value. It trades about 0.32 of its potential returns per unit of risk. Mfs Value Fund is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  4,916  in Mfs Value Fund on December 30, 2023 and sell it today you would earn a total of  203.00  from holding Mfs Value Fund or generate 4.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy95.65%
ValuesDaily Returns

AMERICAN MUTUAL FUND  vs.  MFS VALUE FUND

 Performance 
       Timeline  
American Mutual Fund 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in American Mutual Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, American Mutual may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Mfs Value Fund 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Value Fund are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking indicators, Mfs Value may actually be approaching a critical reversion point that can send shares even higher in April 2024.

American Mutual and Mfs Value Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Mutual and Mfs Value

The main advantage of trading using opposite American Mutual and Mfs Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Mfs Value 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 Value will offset losses from the drop in Mfs Value's long position.
The idea behind American Mutual Fund and Mfs Value Fund 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.
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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