Correlation Between Guidemark Large and Mainstay Epoch

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

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

Diversification Opportunities for Guidemark Large and Mainstay Epoch

-0.65

Correlation Coefficient

Guidemark Large  Mainstay Epoch

Excellent diversification

The 3 months correlation between Guidemark and Mainstay is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Guidemark Large Cap and Mainstay Epoch Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Epoch Small and Guidemark Large 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 Guidemark Large Cap are associated (or correlated) with Mainstay Epoch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Epoch Small has no effect on the direction of Guidemark Large i.e., Guidemark Large and Mainstay Epoch go up and down completely randomly.

Pair Corralation between Guidemark Large and Mainstay Epoch

Assuming the 90 days horizon Guidemark Large Cap is expected to generate 0.52 times more return on investment than Mainstay Epoch. However, Guidemark Large Cap is 1.93 times less risky than Mainstay Epoch. It trades about -0.05 of its potential returns per unit of risk. Mainstay Epoch Small is currently generating about -0.32 per unit of risk. If you would invest  1,163  in Guidemark Large Cap on September 24, 2024 and sell it today you would lose (7.00) from holding Guidemark Large Cap or give up 0.6% of portfolio value over 90 days.

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

Guidemark Large Cap  vs.  Mainstay Epoch Small

Guidemark Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mainstay Epoch Small

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay Epoch Small are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Mainstay Epoch is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guidemark Large and Mainstay Epoch

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

The idea behind Guidemark Large Cap and Mainstay Epoch Small 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.