Correlation Between Mainstay Short and Us Government

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

By analyzing existing cross correlation between Mainstay Short Duration and Us Government Plus, you can compare the effects of market volatilities on Mainstay Short and Us Government 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 Mainstay Short with a short position of Us Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mainstay Short and Us Government.

Diversification Opportunities for Mainstay Short and Us Government

0.66

Correlation Coefficient

Mainstay Short  Us Government

Poor diversification

The 3 months correlation between Mainstay and GVPIX is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Mainstay Short Duration and Us Government Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Government Plus and Mainstay Short 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 Mainstay Short Duration are associated (or correlated) with Us Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Government Plus has no effect on the direction of Mainstay Short i.e., Mainstay Short and Us Government go up and down completely randomly.

Pair Corralation between Mainstay Short and Us Government

Assuming the 90 days horizon Mainstay Short is expected to generate 3.96 times less return on investment than Us Government. But when comparing it to its historical volatility, Mainstay Short Duration is 8.79 times less risky than Us Government. It trades about 0.12 of its potential returns per unit of risk. Us Government Plus is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,252  in Us Government Plus on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Us Government Plus or generate 3.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Mainstay Short Duration  vs.  Us Government Plus

Mainstay Short Duration

Risk-Adjusted Performance

OK

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

Us Government Plus

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Mainstay Short and Us Government

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

The idea behind Mainstay Short Duration and Us Government Plus 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.