Correlation Between Mfs Modity and Commodityrealreturn

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

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

Diversification Opportunities for Mfs Modity and Commodityrealreturn

0.99

Correlation Coefficient

Mfs Modity  Commodityrealreturn

No risk reduction

The 3 months correlation between Mfs and Commodityrealreturn is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Modity Strategy and Commodityrealreturn Strategy F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodityrealreturn and Mfs Modity 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 Modity Strategy are associated (or correlated) with Commodityrealreturn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodityrealreturn has no effect on the direction of Mfs Modity i.e., Mfs Modity and Commodityrealreturn go up and down completely randomly.

Pair Corralation between Mfs Modity and Commodityrealreturn

Assuming the 90 days horizon Mfs Modity is expected to generate 1.6 times less return on investment than Commodityrealreturn. But when comparing it to its historical volatility, Mfs Modity Strategy is 1.17 times less risky than Commodityrealreturn. It trades about 0.07 of its potential returns per unit of risk. Commodityrealreturn Strategy Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,300  in Commodityrealreturn Strategy Fund on February 28, 2024 and sell it today you would earn a total of  23.00  from holding Commodityrealreturn Strategy Fund or generate 1.77% return on investment over 90 days.

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

Mfs Modity Strategy  vs.  Commodityrealreturn Strategy F

Mfs Modity Strategy

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Modity Strategy are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mfs Modity may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Commodityrealreturn

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Commodityrealreturn Strategy Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Commodityrealreturn may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Mfs Modity and Commodityrealreturn

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

The idea behind Mfs Modity Strategy and Commodityrealreturn Strategy Fund 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..