Correlation Between Mainstay Moderate and Mainstay Short

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

Diversification Opportunities for Mainstay Moderate and Mainstay Short

0.82

Correlation Coefficient

Mainstay Moderate  Mainstay Short

Very poor diversification

The 3 months correlation between Mainstay and Mainstay is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Mainstay Moderate Allocation and Mainstay Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Short Duration 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 Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Short Duration has no effect on the direction of Mainstay Moderate i.e., Mainstay Moderate and Mainstay Short go up and down completely randomly.

Pair Corralation between Mainstay Moderate and Mainstay Short

Assuming the 90 days horizon Mainstay Moderate Allocation is expected to generate 4.29 times more return on investment than Mainstay Short. However, Mainstay Moderate is 4.29 times more volatile than Mainstay Short Duration. It trades about 0.17 of its potential returns per unit of risk. Mainstay Short Duration is currently generating about 0.17 per unit of risk. If you would invest  1,425  in Mainstay Moderate Allocation on September 5, 2024 and sell it today you would earn a total of  68.00  from holding Mainstay Moderate Allocation or generate 4.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Mainstay Moderate Allocation  vs.  Mainstay Short Duration

Mainstay Moderate

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay Moderate Allocation are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Mainstay Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mainstay Short Duration

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay Short Duration are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mainstay Short 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 Moderate and Mainstay Short

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

The idea behind Mainstay Moderate Allocation and Mainstay Short Duration 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.