Correlation Between MFS Investment and QNB Corp

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

By analyzing existing cross correlation between MFS Investment Grade and QNB Corp, you can compare the effects of market volatilities on MFS Investment and QNB Corp 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 Investment with a short position of QNB Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFS Investment and QNB Corp.

Diversification Opportunities for MFS Investment and QNB Corp

-0.08

Correlation Coefficient

MFS Investment  QNB Corp

Good diversification

The 3 months correlation between MFS and QNB is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding MFS Investment Grade and QNB Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QNB Corp and MFS Investment 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 Investment Grade are associated (or correlated) with QNB Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QNB Corp has no effect on the direction of MFS Investment i.e., MFS Investment and QNB Corp go up and down completely randomly.

Pair Corralation between MFS Investment and QNB Corp

Considering the 90-day investment horizon MFS Investment is expected to generate 3.54 times less return on investment than QNB Corp. But when comparing it to its historical volatility, MFS Investment Grade is 2.81 times less risky than QNB Corp. It trades about 0.13 of its potential returns per unit of risk. QNB Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,132  in QNB Corp on August 26, 2024 and sell it today you would earn a total of  1,192  from holding QNB Corp or generate 55.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.15%
Values	Daily Returns

MFS Investment Grade  vs.  QNB Corp

MFS Investment Grade

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MFS Investment Grade are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, MFS Investment is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

QNB Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in QNB Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, QNB Corp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with MFS Investment and QNB Corp

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

The idea behind MFS Investment Grade and QNB Corp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.