Correlation Between Commonwealth Global and Mainstay Moderate
Can any of the company-specific risk be diversified away by investing in both Commonwealth Global and Mainstay Moderate 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 Commonwealth Global and Mainstay Moderate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Global Fund and Mainstay Moderate Allocation, you can compare the effects of market volatilities on Commonwealth Global and Mainstay Moderate 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 Commonwealth Global with a short position of Mainstay Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Global and Mainstay Moderate.
Diversification Opportunities for Commonwealth Global and Mainstay Moderate
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Commonwealth and Mainstay is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Global Fund and Mainstay Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Moderate and Commonwealth Global 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 Commonwealth Global Fund are associated (or correlated) with Mainstay Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Moderate has no effect on the direction of Commonwealth Global i.e., Commonwealth Global and Mainstay Moderate go up and down completely randomly.
Pair Corralation between Commonwealth Global and Mainstay Moderate
Assuming the 90 days horizon Commonwealth Global Fund is expected to under-perform the Mainstay Moderate. In addition to that, Commonwealth Global is 1.55 times more volatile than Mainstay Moderate Allocation. It trades about -0.05 of its total potential returns per unit of risk. Mainstay Moderate Allocation is currently generating about -0.07 per unit of volatility. If you would invest 1,381 in Mainstay Moderate Allocation on November 28, 2024 and sell it today you would lose (9.00) from holding Mainstay Moderate Allocation or give up 0.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Global Fund vs. Mainstay Moderate Allocation
Performance |
| Timeline |
| Commonwealth Global |
| Mainstay Moderate |
Commonwealth Global and Mainstay Moderate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Global and Mainstay Moderate
The main advantage of trading using opposite Commonwealth Global and Mainstay Moderate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Global position performs unexpectedly, Mainstay Moderate 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 Moderate will offset losses from the drop in Mainstay Moderate's long position.The idea behind Commonwealth Global Fund and Mainstay Moderate Allocation 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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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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