Correlation Between Mainstay Large and Mainstay Income

Can any of the company-specific risk be diversified away by investing in both Mainstay Large and Mainstay Income 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 Mainstay Income 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 Mainstay Income Builder, you can compare the effects of market volatilities on Mainstay Large and Mainstay Income 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 Mainstay Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mainstay Large and Mainstay Income.

Diversification Opportunities for Mainstay Large and Mainstay Income

-0.57

Correlation Coefficient

Mainstay Large  Mainstay Income

Excellent diversification

The 3 months correlation between Mainstay and Mainstay is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Mainstay Large Cap and Mainstay Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Income Builder 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 Mainstay Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Income Builder has no effect on the direction of Mainstay Large i.e., Mainstay Large and Mainstay Income go up and down completely randomly.

Pair Corralation between Mainstay Large and Mainstay Income

Assuming the 90 days horizon Mainstay Large Cap is expected to under-perform the Mainstay Income. In addition to that, Mainstay Large is 2.85 times more volatile than Mainstay Income Builder. It trades about -0.09 of its total potential returns per unit of risk. Mainstay Income Builder is currently generating about 0.23 per unit of volatility. If you would invest  2,036  in Mainstay Income Builder on December 30, 2024 and sell it today you would earn a total of  88.00  from holding Mainstay Income Builder or generate 4.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	58.06%
Values	Daily Returns

Mainstay Large Cap  vs.  Mainstay Income Builder

Mainstay Large Cap

Risk-Adjusted Performance

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 latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Mainstay Income Builder

Risk-Adjusted Performance

Solid

Over the last 90 days Mainstay Income Builder has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Mainstay Income may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Mainstay Large and Mainstay Income

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

The idea behind Mainstay Large Cap and Mainstay Income Builder 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.