Correlation Between GM and Mainstay Large
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Mainstay Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Mainstay Large Cap, you can compare the effects of market volatilities on GM 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 GM with a short position of Mainstay Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Mainstay Large.
Diversification Opportunities for GM and Mainstay Large
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Mainstay is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Mainstay Large go up and down completely randomly.
Pair Corralation between GM and Mainstay Large
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.65 times more return on investment than Mainstay Large. However, GM is 1.65 times more volatile than Mainstay Large Cap. It trades about 0.31 of its potential returns per unit of risk. Mainstay Large Cap is currently generating about 0.18 per unit of risk. If you would invest 5,273 in General Motors on August 28, 2024 and sell it today you would earn a total of 747.00 from holding General Motors or generate 14.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Mainstay Large Cap
Performance |
| Timeline |
| General Motors |
| Mainstay Large Cap |
GM and Mainstay Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Mainstay Large
The main advantage of trading using opposite GM and Mainstay Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| Mainstay Large vs. Mainstay Tax Free | Mainstay Large vs. Mainstay Large Cap | Mainstay Large vs. Mainstay Mackay High | Mainstay Large vs. Mainstay High Yield |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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