Correlation Between Selected American and Mainstay Epoch

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

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

Diversification Opportunities for Selected American and Mainstay Epoch

0.34

Correlation Coefficient

Selected American  Mainstay Epoch

Weak diversification

The 3 months correlation between Selected and Mainstay is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Selected American Shares and Mainstay Epoch International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Epoch Inter and Selected American 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 Selected American Shares are associated (or correlated) with Mainstay Epoch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Epoch Inter has no effect on the direction of Selected American i.e., Selected American and Mainstay Epoch go up and down completely randomly.

Pair Corralation between Selected American and Mainstay Epoch

Assuming the 90 days horizon Selected American Shares is expected to under-perform the Mainstay Epoch. In addition to that, Selected American is 1.37 times more volatile than Mainstay Epoch International. It trades about -0.17 of its total potential returns per unit of risk. Mainstay Epoch International is currently generating about 0.41 per unit of volatility. If you would invest  3,867  in Mainstay Epoch International on December 5, 2024 and sell it today you would earn a total of  212.00  from holding Mainstay Epoch International or generate 5.48% return on investment over 90 days.

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

Selected American Shares  vs.  Mainstay Epoch International

Selected American Shares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Selected American Shares has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Mainstay Epoch Inter

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay Epoch International are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mainstay Epoch is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Selected American and Mainstay Epoch

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

The idea behind Selected American Shares and Mainstay Epoch International 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..