Correlation Between Red Oak and Mainstay Convertible

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

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

Diversification Opportunities for Red Oak and Mainstay Convertible

0.85

Correlation Coefficient

Red Oak  Mainstay Convertible

Very poor diversification

The 3 months correlation between Red and Mainstay is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Red Oak Technology and Mainstay Vertible Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Convertible and Red Oak 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 Red Oak Technology 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 Red Oak i.e., Red Oak and Mainstay Convertible go up and down completely randomly.

Pair Corralation between Red Oak and Mainstay Convertible

Assuming the 90 days horizon Red Oak Technology is expected to under-perform the Mainstay Convertible. In addition to that, Red Oak is 2.95 times more volatile than Mainstay Vertible Fund. It trades about -0.11 of its total potential returns per unit of risk. Mainstay Vertible Fund is currently generating about -0.05 per unit of volatility. If you would invest  1,876  in Mainstay Vertible Fund on December 20, 2024 and sell it today you would lose (34.00) from holding Mainstay Vertible Fund or give up 1.81% of portfolio value over 90 days.

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

Red Oak Technology  vs.  Mainstay Vertible Fund

Red Oak Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Oak Technology has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Mainstay Convertible

Risk-Adjusted Performance

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 Red Oak and Mainstay Convertible

The main advantage of trading using opposite Red Oak and Mainstay Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Oak 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 Red Oak Technology 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.