Correlation Between Mainstay California and Power Global
Can any of the company-specific risk be diversified away by investing in both Mainstay California and Power Global 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 California and Power Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mainstay California Tax and Power Global Tactical, you can compare the effects of market volatilities on Mainstay California and Power Global 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 California with a short position of Power Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mainstay California and Power Global.
Diversification Opportunities for Mainstay California and Power Global
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Mainstay and Power is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Mainstay California Tax and Power Global Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Global Tactical and Mainstay California 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 California Tax are associated (or correlated) with Power Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Global Tactical has no effect on the direction of Mainstay California i.e., Mainstay California and Power Global go up and down completely randomly.
Pair Corralation between Mainstay California and Power Global
Assuming the 90 days horizon Mainstay California is expected to generate 2.84 times less return on investment than Power Global. But when comparing it to its historical volatility, Mainstay California Tax is 2.1 times less risky than Power Global. It trades about 0.07 of its potential returns per unit of risk. Power Global Tactical is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 898.00 in Power Global Tactical on September 3, 2024 and sell it today you would earn a total of 226.00 from holding Power Global Tactical or generate 25.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mainstay California Tax vs. Power Global Tactical
Performance |
| Timeline |
| Mainstay California Tax |
| Power Global Tactical |
Mainstay California and Power Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mainstay California and Power Global
The main advantage of trading using opposite Mainstay California and Power Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mainstay California position performs unexpectedly, Power Global 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 Power Global will offset losses from the drop in Power Global's long position.The idea behind Mainstay California Tax and Power Global Tactical 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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