Correlation Between Aberdeen Tax and Mainstay Convertible

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

By analyzing existing cross correlation between Aberdeen Tax Free Incm and Mainstay Vertible Fund, you can compare the effects of market volatilities on Aberdeen Tax and Mainstay Convertible 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 Aberdeen Tax with a short position of Mainstay Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aberdeen Tax and Mainstay Convertible.

Diversification Opportunities for Aberdeen Tax and Mainstay Convertible

0.77

Correlation Coefficient

Aberdeen Tax  Mainstay Convertible

Poor diversification

The 3 months correlation between Aberdeen and Mainstay is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Tax Free Incm and Mainstay Vertible Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Convertible and Aberdeen Tax 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 Aberdeen Tax Free Incm are associated (or correlated) with Mainstay Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Convertible has no effect on the direction of Aberdeen Tax i.e., Aberdeen Tax and Mainstay Convertible go up and down completely randomly.

Pair Corralation between Aberdeen Tax and Mainstay Convertible

Assuming the 90 days horizon Aberdeen Tax Free Incm is expected to generate 0.36 times more return on investment than Mainstay Convertible. However, Aberdeen Tax Free Incm is 2.81 times less risky than Mainstay Convertible. It trades about -0.14 of its potential returns per unit of risk. Mainstay Vertible Fund is currently generating about -0.14 per unit of risk. If you would invest  894.00  in Aberdeen Tax Free Incm on October 11, 2024 and sell it today you would lose (10.00) from holding Aberdeen Tax Free Incm or give up 1.12% of portfolio value over 90 days.

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

Aberdeen Tax Free Incm  vs.  Mainstay Vertible Fund

Aberdeen Tax Free

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mainstay Convertible

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aberdeen Tax and Mainstay Convertible

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

The idea behind Aberdeen Tax Free Incm and Mainstay Vertible Fund 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 Global Correlations module to find global opportunities by holding instruments from different markets.