Correlation Between New Economy and Mfs Growth
Can any of the company-specific risk be diversified away by investing in both New Economy and Mfs Growth 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 New Economy and Mfs Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Economy Fund and Mfs Growth Fund, you can compare the effects of market volatilities on New Economy and Mfs Growth 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 New Economy with a short position of Mfs Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Economy and Mfs Growth.
Diversification Opportunities for New Economy and Mfs Growth
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between New and Mfs is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding New Economy Fund and Mfs Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Growth Fund and New Economy 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 New Economy Fund are associated (or correlated) with Mfs Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Growth Fund has no effect on the direction of New Economy i.e., New Economy and Mfs Growth go up and down completely randomly.
Pair Corralation between New Economy and Mfs Growth
Assuming the 90 days horizon New Economy is expected to generate 1.45 times less return on investment than Mfs Growth. But when comparing it to its historical volatility, New Economy Fund is 1.18 times less risky than Mfs Growth. It trades about 0.08 of its potential returns per unit of risk. Mfs Growth Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 18,188 in Mfs Growth Fund on January 25, 2024 and sell it today you would earn a total of 1,138 from holding Mfs Growth Fund or generate 6.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Economy Fund vs. Mfs Growth Fund
Performance |
| Timeline |
| New Economy Fund |
| Mfs Growth Fund |
New Economy and Mfs Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Economy and Mfs Growth
The main advantage of trading using opposite New Economy and Mfs Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Economy position performs unexpectedly, Mfs Growth 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 Growth will offset losses from the drop in Mfs Growth's long position.| New Economy vs. Income Fund Of | New Economy vs. New World Fund | New Economy vs. American Mutual Fund | New Economy vs. American Mutual Fund |
| Mfs Growth vs. Mfs Prudent Investor | Mfs Growth vs. Mfs Prudent Investor | Mfs Growth vs. Mfs Prudent Investor | Mfs Growth vs. Mfs Prudent Investor |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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