Correlation Between Sentinel Small and Mainstay Large

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

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

Diversification Opportunities for Sentinel Small and Mainstay Large

0.51

Correlation Coefficient

Sentinel Small  Mainstay Large

Very weak diversification

The 3 months correlation between Sentinel and Mainstay is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Small Pany and Mainstay Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Large Cap and Sentinel Small 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 Sentinel Small Pany are associated (or correlated) with Mainstay Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Large Cap has no effect on the direction of Sentinel Small i.e., Sentinel Small and Mainstay Large go up and down completely randomly.

Pair Corralation between Sentinel Small and Mainstay Large

Assuming the 90 days horizon Sentinel Small is expected to generate 2.3 times less return on investment than Mainstay Large. But when comparing it to its historical volatility, Sentinel Small Pany is 1.13 times less risky than Mainstay Large. It trades about 0.05 of its potential returns per unit of risk. Mainstay Large Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  707.00  in Mainstay Large Cap on September 29, 2024 and sell it today you would earn a total of  501.00  from holding Mainstay Large Cap or generate 70.86% return on investment over 90 days.

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

Sentinel Small Pany  vs.  Mainstay Large Cap

Sentinel Small Pany

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mainstay Large Cap

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Sentinel Small and Mainstay Large

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

The idea behind Sentinel Small Pany and Mainstay Large Cap 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.