Correlation Between Diversified Municipal and Mainstay Mackay
Can any of the company-specific risk be diversified away by investing in both Diversified Municipal 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 Diversified Municipal and Mainstay Mackay into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diversified Municipal Portfolio and Mainstay Mackay Short, you can compare the effects of market volatilities on Diversified Municipal 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 Diversified Municipal with a short position of Mainstay Mackay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diversified Municipal and Mainstay Mackay.
Diversification Opportunities for Diversified Municipal and Mainstay Mackay
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Diversified and Mainstay is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Municipal Portfoli and Mainstay Mackay Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Mackay Short and Diversified Municipal 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 Diversified Municipal Portfolio 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 Short has no effect on the direction of Diversified Municipal i.e., Diversified Municipal and Mainstay Mackay go up and down completely randomly.
Pair Corralation between Diversified Municipal and Mainstay Mackay
Assuming the 90 days horizon Diversified Municipal Portfolio is expected to generate 1.43 times more return on investment than Mainstay Mackay. However, Diversified Municipal is 1.43 times more volatile than Mainstay Mackay Short. It trades about 0.11 of its potential returns per unit of risk. Mainstay Mackay Short is currently generating about 0.15 per unit of risk. If you would invest 1,389 in Diversified Municipal Portfolio on August 29, 2024 and sell it today you would earn a total of 6.00 from holding Diversified Municipal Portfolio or generate 0.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diversified Municipal Portfoli vs. Mainstay Mackay Short
Performance |
| Timeline |
| Diversified Municipal |
| Mainstay Mackay Short |
Diversified Municipal and Mainstay Mackay Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diversified Municipal and Mainstay Mackay
The main advantage of trading using opposite Diversified Municipal and Mainstay Mackay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diversified Municipal 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 Diversified Municipal Portfolio and Mainstay Mackay Short 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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