Correlation Between Mainstay Moderate and Mainstay Large

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

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

Diversification Opportunities for Mainstay Moderate and Mainstay Large

0.01

Correlation Coefficient

Mainstay Moderate  Mainstay Large

Significant diversification

The 3 months correlation between Mainstay and Mainstay is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Mainstay Moderate Allocation and Mainstay Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Large Cap and Mainstay Moderate 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 Moderate Allocation are associated (or correlated) with Mainstay Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Large Cap has no effect on the direction of Mainstay Moderate i.e., Mainstay Moderate and Mainstay Large go up and down completely randomly.

Pair Corralation between Mainstay Moderate and Mainstay Large

Assuming the 90 days horizon Mainstay Moderate Allocation is expected to generate 0.25 times more return on investment than Mainstay Large. However, Mainstay Moderate Allocation is 4.02 times less risky than Mainstay Large. It trades about 0.08 of its potential returns per unit of risk. Mainstay Large Cap is currently generating about 0.02 per unit of risk. If you would invest  1,185  in Mainstay Moderate Allocation on September 28, 2024 and sell it today you would earn a total of  238.00  from holding Mainstay Moderate Allocation or generate 20.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Mainstay Moderate Allocation  vs.  Mainstay Large Cap

Mainstay Moderate

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 drivers 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.

Pair Trading with Mainstay Moderate and Mainstay Large

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

The idea behind Mainstay Moderate Allocation and Mainstay Large Cap 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.