Correlation Between MainStay CBRE and Capital Southwest

Can any of the company-specific risk be diversified away by investing in both MainStay CBRE and Capital Southwest 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 CBRE and Capital Southwest into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MainStay CBRE Global and Capital Southwest, you can compare the effects of market volatilities on MainStay CBRE and Capital Southwest 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 CBRE with a short position of Capital Southwest. Check out your portfolio center. Please also check ongoing floating volatility patterns of MainStay CBRE and Capital Southwest.

Diversification Opportunities for MainStay CBRE and Capital Southwest

0.53

Correlation Coefficient

MainStay CBRE  Capital Southwest

Very weak diversification

The 3 months correlation between MainStay and Capital is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding MainStay CBRE Global and Capital Southwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Southwest and MainStay CBRE 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 CBRE Global are associated (or correlated) with Capital Southwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Southwest has no effect on the direction of MainStay CBRE i.e., MainStay CBRE and Capital Southwest go up and down completely randomly.

Pair Corralation between MainStay CBRE and Capital Southwest

Given the investment horizon of 90 days MainStay CBRE Global is expected to generate 1.07 times more return on investment than Capital Southwest. However, MainStay CBRE is 1.07 times more volatile than Capital Southwest. It trades about 0.18 of its potential returns per unit of risk. Capital Southwest is currently generating about 0.09 per unit of risk. If you would invest  1,179  in MainStay CBRE Global on December 29, 2024 and sell it today you would earn a total of  146.00  from holding MainStay CBRE Global or generate 12.38% return on investment over 90 days.

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

MainStay CBRE Global  vs.  Capital Southwest

MainStay CBRE Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MainStay CBRE Global are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, MainStay CBRE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Capital Southwest

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Southwest are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Capital Southwest is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MainStay CBRE and Capital Southwest

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

The idea behind MainStay CBRE Global and Capital Southwest 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 Transaction History module to view history of all your transactions and understand their impact on performance.