Correlation Between Mainstay Epoch and Vanguard Energy

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

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

Diversification Opportunities for Mainstay Epoch and Vanguard Energy

-0.16

Correlation Coefficient

Mainstay Epoch  Vanguard Energy

Good diversification

The 3 months correlation between Mainstay and Vanguard is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Mainstay Epoch Small and Vanguard Energy Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Energy Index and Mainstay Epoch 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 Epoch Small are associated (or correlated) with Vanguard Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Energy Index has no effect on the direction of Mainstay Epoch i.e., Mainstay Epoch and Vanguard Energy go up and down completely randomly.

Pair Corralation between Mainstay Epoch and Vanguard Energy

Assuming the 90 days horizon Mainstay Epoch is expected to generate 1.14 times less return on investment than Vanguard Energy. But when comparing it to its historical volatility, Mainstay Epoch Small is 1.36 times less risky than Vanguard Energy. It trades about 0.13 of its potential returns per unit of risk. Vanguard Energy Index is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,918  in Vanguard Energy Index on December 23, 2024 and sell it today you would earn a total of  500.00  from holding Vanguard Energy Index or generate 8.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.57%
Values	Daily Returns

Mainstay Epoch Small  vs.  Vanguard Energy Index

Mainstay Epoch Small

Risk-Adjusted Performance

OK

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

Vanguard Energy Index

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Energy Index are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Mainstay Epoch and Vanguard Energy

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

The idea behind Mainstay Epoch Small and Vanguard Energy Index 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.