Correlation Between Small Cap and Mainstay International

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

By analyzing existing cross correlation between Small Cap Value and Mainstay International Opportunities, you can compare the effects of market volatilities on Small Cap and Mainstay International 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 Small Cap with a short position of Mainstay International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Mainstay International.

Diversification Opportunities for Small Cap and Mainstay International

-0.33

Correlation Coefficient

Small Cap  Mainstay International

Very good diversification

The 3 months correlation between Small and Mainstay is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Mainstay International Opportu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay International and Small Cap 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 Small Cap Value are associated (or correlated) with Mainstay International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay International has no effect on the direction of Small Cap i.e., Small Cap and Mainstay International go up and down completely randomly.

Pair Corralation between Small Cap and Mainstay International

Assuming the 90 days horizon Small Cap Value is expected to under-perform the Mainstay International. In addition to that, Small Cap is 1.32 times more volatile than Mainstay International Opportunities. It trades about -0.07 of its total potential returns per unit of risk. Mainstay International Opportunities is currently generating about 0.19 per unit of volatility. If you would invest  766.00  in Mainstay International Opportunities on December 21, 2024 and sell it today you would earn a total of  71.00  from holding Mainstay International Opportunities or generate 9.27% return on investment over 90 days.

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

Small Cap Value  vs.  Mainstay International Opportu

Small Cap Value

Risk-Adjusted Performance

Very Weak

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

Mainstay International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay International Opportunities are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mainstay International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Small Cap and Mainstay International

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

The idea behind Small Cap Value and Mainstay International Opportunities 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.