Correlation Between Mainstay and Easterly Snow

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

By analyzing existing cross correlation between Mainstay Sp 500 and Easterly Snow Longshort, you can compare the effects of market volatilities on Mainstay and Easterly Snow 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 with a short position of Easterly Snow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mainstay and Easterly Snow.

Diversification Opportunities for Mainstay and Easterly Snow

0.41

Correlation Coefficient

Mainstay  Easterly Snow

Very weak diversification

The 3 months correlation between Mainstay and Easterly is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Mainstay Sp 500 and Easterly Snow Longshort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Easterly Snow Longshort and Mainstay 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 Sp 500 are associated (or correlated) with Easterly Snow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Easterly Snow Longshort has no effect on the direction of Mainstay i.e., Mainstay and Easterly Snow go up and down completely randomly.

Pair Corralation between Mainstay and Easterly Snow

Assuming the 90 days horizon Mainstay Sp 500 is expected to under-perform the Easterly Snow. In addition to that, Mainstay is 1.38 times more volatile than Easterly Snow Longshort. It trades about -0.08 of its total potential returns per unit of risk. Easterly Snow Longshort is currently generating about 0.06 per unit of volatility. If you would invest  3,238  in Easterly Snow Longshort on December 30, 2024 and sell it today you would earn a total of  85.00  from holding Easterly Snow Longshort or generate 2.63% return on investment over 90 days.

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

Mainstay Sp 500  vs.  Easterly Snow Longshort

Mainstay Sp 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mainstay Sp 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Mainstay is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Easterly Snow Longshort

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Easterly Snow Longshort are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Easterly Snow 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 and Easterly Snow

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

The idea behind Mainstay Sp 500 and Easterly Snow Longshort 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.