Correlation Between Vanguard and Mfs Value

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

By analyzing existing cross correlation between Vanguard Sp 500 and Mfs Value Fund, you can compare the effects of market volatilities on Vanguard and Mfs Value 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 Vanguard with a short position of Mfs Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and Mfs Value.

Diversification Opportunities for Vanguard and Mfs Value

1.0

Correlation Coefficient

Vanguard  Mfs Value

No risk reduction

The 3 months correlation between Vanguard and Mfs is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Sp 500 and Mfs Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Value Fund and Vanguard 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 Vanguard Sp 500 are associated (or correlated) with Mfs Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Value Fund has no effect on the direction of Vanguard i.e., Vanguard and Mfs Value go up and down completely randomly.

Pair Corralation between Vanguard and Mfs Value

Assuming the 90 days horizon Vanguard Sp 500 is expected to under-perform the Mfs Value. In addition to that, Vanguard is 1.05 times more volatile than Mfs Value Fund. It trades about -0.08 of its total potential returns per unit of risk. Mfs Value Fund is currently generating about -0.08 per unit of volatility. If you would invest  5,019  in Mfs Value Fund on January 25, 2024 and sell it today you would lose (59.00) from holding Mfs Value Fund or give up 1.18% of portfolio value over 90 days.

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

Vanguard Sp 500  vs.  Mfs Value Fund

Vanguard Sp 500

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Sp 500 are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mfs Value Fund

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Value Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Mfs Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard and Mfs Value

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

The idea behind Vanguard Sp 500 and Mfs Value 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.