Correlation Between Unconstrained Emerging and Mfs Emerging

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

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

Diversification Opportunities for Unconstrained Emerging and Mfs Emerging

0.75

Correlation Coefficient

Unconstrained Emerging  Mfs Emerging

Poor diversification

The 3 months correlation between Unconstrained and Mfs is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Unconstrained Emerging Markets 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 Unconstrained 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 Unconstrained Emerging Markets 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 Unconstrained Emerging i.e., Unconstrained Emerging and Mfs Emerging go up and down completely randomly.

Pair Corralation between Unconstrained Emerging and Mfs Emerging

Assuming the 90 days horizon Unconstrained Emerging Markets is expected to under-perform the Mfs Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Unconstrained Emerging Markets is 1.01 times less risky than Mfs Emerging. The mutual fund trades about -0.24 of its potential returns per unit of risk. The Mfs Emerging Markets is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  1,198  in Mfs Emerging Markets on January 26, 2024 and sell it today you would lose (20.00) from holding Mfs Emerging Markets or give up 1.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Unconstrained Emerging Markets  vs.  Mfs Emerging Markets

Unconstrained Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unconstrained Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Unconstrained Emerging 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

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Emerging Markets are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Mfs Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Unconstrained Emerging and Mfs Emerging

The main advantage of trading using opposite Unconstrained Emerging and Mfs Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unconstrained Emerging 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 Unconstrained Emerging Markets 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.