Correlation Between Mainstay Moderate and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Mainstay Moderate and Dow Jones 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 Mainstay Moderate and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mainstay Moderate Allocation and Dow Jones Industrial, you can compare the effects of market volatilities on Mainstay Moderate and Dow Jones 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 Mainstay Moderate with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mainstay Moderate and Dow Jones.
Diversification Opportunities for Mainstay Moderate and Dow Jones
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mainstay and Dow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Mainstay Moderate Allocation and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Mainstay Moderate 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 Mainstay Moderate Allocation are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Mainstay Moderate i.e., Mainstay Moderate and Dow Jones go up and down completely randomly.
Pair Corralation between Mainstay Moderate and Dow Jones
Assuming the 90 days horizon Mainstay Moderate is expected to generate 2.32 times less return on investment than Dow Jones. But when comparing it to its historical volatility, Mainstay Moderate Allocation is 1.95 times less risky than Dow Jones. It trades about 0.24 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 4,214,154 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 258,052 from holding Dow Jones Industrial or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mainstay Moderate Allocation vs. Dow Jones Industrial
Performance |
| Timeline |
Mainstay Moderate and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Mainstay Moderate Allocation
Pair trading matchups for Mainstay Moderate
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Mainstay Moderate and Dow Jones
The main advantage of trading using opposite Mainstay Moderate and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mainstay Moderate position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Mainstay Moderate vs. Qs Growth Fund | Mainstay Moderate vs. Small Cap Stock | Mainstay Moderate vs. Eic Value Fund | Mainstay Moderate vs. Volumetric Fund Volumetric |
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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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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