Correlation Between Mainstay California and Mainstay Mackay
Can any of the company-specific risk be diversified away by investing in both Mainstay California and Mainstay Mackay 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 Mainstay Mackay 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 Mainstay Mackay New, you can compare the effects of market volatilities on Mainstay California and Mainstay Mackay 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 Mainstay Mackay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mainstay California and Mainstay Mackay.
Diversification Opportunities for Mainstay California and Mainstay Mackay
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mainstay and Mainstay is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Mainstay California Tax and Mainstay Mackay New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Mackay New 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 Mainstay Mackay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Mackay New has no effect on the direction of Mainstay California i.e., Mainstay California and Mainstay Mackay go up and down completely randomly.
Pair Corralation between Mainstay California and Mainstay Mackay
Assuming the 90 days horizon Mainstay California is expected to generate 1.1 times less return on investment than Mainstay Mackay. But when comparing it to its historical volatility, Mainstay California Tax is 1.11 times less risky than Mainstay Mackay. It trades about 0.07 of its potential returns per unit of risk. Mainstay Mackay New is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 885.00 in Mainstay Mackay New on August 30, 2024 and sell it today you would earn a total of 90.00 from holding Mainstay Mackay New or generate 10.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mainstay California Tax vs. Mainstay Mackay New
Performance |
| Timeline |
| Mainstay California Tax |
| Mainstay Mackay New |
Mainstay California and Mainstay Mackay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mainstay California and Mainstay Mackay
The main advantage of trading using opposite Mainstay California and Mainstay Mackay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mainstay California position performs unexpectedly, Mainstay Mackay 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 Mackay will offset losses from the drop in Mainstay Mackay's long position.The idea behind Mainstay California Tax and Mainstay Mackay New 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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