Correlation Between Commonwealth Global and Mainstay Large

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

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

Diversification Opportunities for Commonwealth Global and Mainstay Large

0.07

Correlation Coefficient

Commonwealth Global  Mainstay Large

Significant diversification

The 3 months correlation between Commonwealth and Mainstay is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Global Fund and Mainstay Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Large Cap and Commonwealth Global 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 Commonwealth Global Fund are associated (or correlated) with Mainstay Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Large Cap has no effect on the direction of Commonwealth Global i.e., Commonwealth Global and Mainstay Large go up and down completely randomly.

Pair Corralation between Commonwealth Global and Mainstay Large

Assuming the 90 days horizon Commonwealth Global Fund is expected to under-perform the Mainstay Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Commonwealth Global Fund is 1.36 times less risky than Mainstay Large. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Mainstay Large Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,116  in Mainstay Large Cap on October 7, 2024 and sell it today you would earn a total of  85.00  from holding Mainstay Large Cap or generate 7.62% return on investment over 90 days.

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

Commonwealth Global Fund  vs.  Mainstay Large Cap

Commonwealth Global

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mainstay Large Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay Large Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Mainstay Large may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Commonwealth Global and Mainstay Large

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

The idea behind Commonwealth Global Fund and Mainstay Large Cap 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.