Correlation Between Mfs High and Applied Finance

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

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

Diversification Opportunities for Mfs High and Applied Finance

0.63

Correlation Coefficient

Mfs High  Applied Finance

Poor diversification

The 3 months correlation between Mfs and Applied is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Mfs High Income and Applied Finance Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Finance Select and Mfs High 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 High Income are associated (or correlated) with Applied Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Finance Select has no effect on the direction of Mfs High i.e., Mfs High and Applied Finance go up and down completely randomly.

Pair Corralation between Mfs High and Applied Finance

Assuming the 90 days horizon Mfs High is expected to generate 2.73 times less return on investment than Applied Finance. But when comparing it to its historical volatility, Mfs High Income is 3.28 times less risky than Applied Finance. It trades about 0.12 of its potential returns per unit of risk. Applied Finance Select is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,307  in Applied Finance Select on August 16, 2025 and sell it today you would earn a total of  101.00  from holding Applied Finance Select or generate 4.38% return on investment over 90 days.

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

Mfs High Income  vs.  Applied Finance Select

Mfs High Income

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs High Income are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Mfs High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Applied Finance Select

Risk-Adjusted Performance

Fair

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

Pair Trading with Mfs High and Applied Finance

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

The idea behind Mfs High Income and Applied Finance Select 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.