Correlation Between MFS Government and BNY Mellon

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

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

Diversification Opportunities for MFS Government and BNY Mellon

0.18

Correlation Coefficient

MFS Government  BNY Mellon

Average diversification

The 3 months correlation between MFS and BNY is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding MFS Government Markets and BNY Mellon High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon High and MFS Government 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 Government Markets are associated (or correlated) with BNY Mellon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNY Mellon High has no effect on the direction of MFS Government i.e., MFS Government and BNY Mellon go up and down completely randomly.

Pair Corralation between MFS Government and BNY Mellon

Considering the 90-day investment horizon MFS Government Markets is expected to generate 1.05 times more return on investment than BNY Mellon. However, MFS Government is 1.05 times more volatile than BNY Mellon High. It trades about -0.13 of its potential returns per unit of risk. BNY Mellon High is currently generating about -0.13 per unit of risk. If you would invest  316.00  in MFS Government Markets on January 30, 2024 and sell it today you would lose (5.50) from holding MFS Government Markets or give up 1.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

MFS Government Markets  vs.  BNY Mellon High

MFS Government Markets

Risk-Adjusted Performance

0 of 100

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.

BNY Mellon High

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon High are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, BNY Mellon 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 Government and BNY Mellon

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

The idea behind MFS Government Markets and BNY Mellon 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.