Correlation Between Financial Industries and Mainstay Indexed

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

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

Diversification Opportunities for Financial Industries and Mainstay Indexed

-0.36

Correlation Coefficient

Financial Industries  Mainstay Indexed

Very good diversification

The 3 months correlation between Financial and Mainstay is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund and Mainstay Indexed Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Indexed Bond and Financial Industries 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 Financial Industries Fund are associated (or correlated) with Mainstay Indexed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Indexed Bond has no effect on the direction of Financial Industries i.e., Financial Industries and Mainstay Indexed go up and down completely randomly.

Pair Corralation between Financial Industries and Mainstay Indexed

Assuming the 90 days horizon Financial Industries Fund is expected to under-perform the Mainstay Indexed. In addition to that, Financial Industries is 12.98 times more volatile than Mainstay Indexed Bond. It trades about -0.01 of its total potential returns per unit of risk. Mainstay Indexed Bond is currently generating about 0.3 per unit of volatility. If you would invest  901.00  in Mainstay Indexed Bond on December 22, 2024 and sell it today you would earn a total of  15.00  from holding Mainstay Indexed Bond or generate 1.66% return on investment over 90 days.

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

Financial Industries Fund  vs.  Mainstay Indexed Bond

Financial Industries

Risk-Adjusted Performance

Very Weak

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

Mainstay Indexed Bond

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay Indexed Bond are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mainstay Indexed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Financial Industries and Mainstay Indexed

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

The idea behind Financial Industries Fund and Mainstay Indexed Bond 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.