Correlation Between Mainstay Large and Omni Small

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

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

Diversification Opportunities for Mainstay Large and Omni Small

0.2

Correlation Coefficient

Mainstay Large  Omni Small

Modest diversification

The 3 months correlation between Mainstay and Omni is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Mainstay Large Cap and Omni Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omni Small Cap and Mainstay 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 Mainstay Large Cap are associated (or correlated) with Omni Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omni Small Cap has no effect on the direction of Mainstay Large i.e., Mainstay Large and Omni Small go up and down completely randomly.

Pair Corralation between Mainstay Large and Omni Small

Assuming the 90 days horizon Mainstay Large is expected to generate 1.63 times less return on investment than Omni Small. In addition to that, Mainstay Large is 1.38 times more volatile than Omni Small Cap Value. It trades about 0.02 of its total potential returns per unit of risk. Omni Small Cap Value is currently generating about 0.04 per unit of volatility. If you would invest  1,585  in Omni Small Cap Value on September 13, 2024 and sell it today you would earn a total of  371.00  from holding Omni Small Cap Value or generate 23.41% return on investment over 90 days.

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

Mainstay Large Cap  vs.  Omni Small Cap Value

Mainstay Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mainstay Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Omni Small Cap

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Omni Small Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Omni Small 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 Large and Omni Small

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

The idea behind Mainstay Large Cap and Omni Small Cap Value 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.