Correlation Between Vanguard Small and Mainstay Large

Can any of the company-specific risk be diversified away by investing in both Vanguard 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 Vanguard 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 Vanguard Small Cap Value and Mainstay Large Cap, you can compare the effects of market volatilities on Vanguard 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 Vanguard Small with a short position of Mainstay Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Mainstay Large.

Diversification Opportunities for Vanguard Small and Mainstay Large

0.02

Correlation Coefficient

Vanguard Small  Mainstay Large

Significant diversification

The 3 months correlation between Vanguard and Mainstay is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Value 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 Vanguard 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 Vanguard Small Cap Value 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 Vanguard Small i.e., Vanguard Small and Mainstay Large go up and down completely randomly.

Pair Corralation between Vanguard Small and Mainstay Large

Assuming the 90 days horizon Vanguard Small Cap Value is expected to generate 0.23 times more return on investment than Mainstay Large. However, Vanguard Small Cap Value is 4.41 times less risky than Mainstay Large. It trades about 0.0 of its potential returns per unit of risk. Mainstay Large Cap is currently generating about -0.12 per unit of risk. If you would invest  4,795  in Vanguard Small Cap Value on September 23, 2024 and sell it today you would lose (10.00) from holding Vanguard Small Cap Value or give up 0.21% of portfolio value over 90 days.

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

Vanguard Small Cap Value  vs.  Mainstay Large Cap

Vanguard Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Small Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard 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

0 of 100

Very Weak

Over the last 90 days Mainstay Large Cap 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 fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Vanguard Small and Mainstay Large

The main advantage of trading using opposite Vanguard Small and Mainstay Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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 Vanguard Small Cap Value 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.