Correlation Between Mfs Emerging and Pimco Emerging
Can any of the company-specific risk be diversified away by investing in both Mfs Emerging and Pimco Emerging 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 Emerging and Pimco Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mfs Emerging Markets and Pimco Emerging Local, you can compare the effects of market volatilities on Mfs Emerging and Pimco Emerging 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 Emerging with a short position of Pimco Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs Emerging and Pimco Emerging.
Diversification Opportunities for Mfs Emerging and Pimco Emerging
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mfs and Pimco is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Emerging Markets and Pimco Emerging Local in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Emerging Local and Mfs Emerging 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 Emerging Markets are associated (or correlated) with Pimco Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Emerging Local has no effect on the direction of Mfs Emerging i.e., Mfs Emerging and Pimco Emerging go up and down completely randomly.
Pair Corralation between Mfs Emerging and Pimco Emerging
Assuming the 90 days horizon Mfs Emerging Markets is expected to under-perform the Pimco Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Mfs Emerging Markets is 1.0 times less risky than Pimco Emerging. The mutual fund trades about -0.35 of its potential returns per unit of risk. The Pimco Emerging Local is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest 586.00 in Pimco Emerging Local on January 26, 2024 and sell it today you would lose (15.00) from holding Pimco Emerging Local or give up 2.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mfs Emerging Markets vs. Pimco Emerging Local
Performance |
| Timeline |
| Mfs Emerging Markets |
| Pimco Emerging Local |
Mfs Emerging and Pimco Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mfs Emerging and Pimco Emerging
The main advantage of trading using opposite Mfs Emerging and Pimco Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mfs Emerging position performs unexpectedly, Pimco Emerging 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 Pimco Emerging will offset losses from the drop in Pimco Emerging's long position.The idea behind Mfs Emerging Markets and Pimco Emerging Local 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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