Correlation Between Mainstay Moderate and Hennessy Technology
Can any of the company-specific risk be diversified away by investing in both Mainstay Moderate and Hennessy Technology 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 Hennessy Technology 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 Hennessy Technology Fund, you can compare the effects of market volatilities on Mainstay Moderate and Hennessy Technology 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 Hennessy Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mainstay Moderate and Hennessy Technology.
Diversification Opportunities for Mainstay Moderate and Hennessy Technology
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mainstay and Hennessy is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Mainstay Moderate Allocation and Hennessy Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Technology 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 Hennessy Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Technology has no effect on the direction of Mainstay Moderate i.e., Mainstay Moderate and Hennessy Technology go up and down completely randomly.
Pair Corralation between Mainstay Moderate and Hennessy Technology
Assuming the 90 days horizon Mainstay Moderate is expected to generate 1.71 times less return on investment than Hennessy Technology. But when comparing it to its historical volatility, Mainstay Moderate Allocation is 2.46 times less risky than Hennessy Technology. It trades about 0.11 of its potential returns per unit of risk. Hennessy Technology Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,778 in Hennessy Technology Fund on September 12, 2024 and sell it today you would earn a total of 604.00 from holding Hennessy Technology Fund or generate 33.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mainstay Moderate Allocation vs. Hennessy Technology Fund
Performance |
| Timeline |
| Mainstay Moderate |
| Hennessy Technology |
Mainstay Moderate and Hennessy Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mainstay Moderate and Hennessy Technology
The main advantage of trading using opposite Mainstay Moderate and Hennessy Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mainstay Moderate position performs unexpectedly, Hennessy Technology 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 Hennessy Technology will offset losses from the drop in Hennessy Technology's long position.The idea behind Mainstay Moderate Allocation and Hennessy Technology Fund 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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