Correlation Between Stone Harbor and Mfs Emerging

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

Diversification Opportunities for Stone Harbor and Mfs Emerging

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Stone and Mfs is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding STONE HARBOR LOCAL and MFS EMERGING MARKETS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Emerging Markets and Stone Harbor 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 Stone Harbor Local are associated (or correlated) with Mfs Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Emerging Markets has no effect on the direction of Stone Harbor i.e., Stone Harbor and Mfs Emerging go up and down completely randomly.

Pair Corralation between Stone Harbor and Mfs Emerging

Assuming the 90 days horizon Stone Harbor Local is expected to under-perform the Mfs Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Stone Harbor Local is 1.01 times less risky than Mfs Emerging. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Mfs Emerging Markets is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  560.00  in Mfs Emerging Markets on December 29, 2023 and sell it today you would earn a total of  0.00  from holding Mfs Emerging Markets or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.65%
ValuesDaily Returns

STONE HARBOR LOCAL  vs.  MFS EMERGING MARKETS

 Performance 
       Timeline  
Stone Harbor Local 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Stone Harbor Local has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Stone Harbor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Mfs Emerging Markets 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Mfs Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, Mfs Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Stone Harbor and Mfs Emerging Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Stone Harbor and Mfs Emerging

The main advantage of trading using opposite Stone Harbor and Mfs Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Harbor position performs unexpectedly, Mfs 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 Mfs Emerging will offset losses from the drop in Mfs Emerging's long position.
The idea behind Stone Harbor Local and Mfs Emerging Markets 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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