Correlation Between James Balanced and Mainstay Large

Can any of the company-specific risk be diversified away by investing in both James Balanced and Mainstay Large 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 James Balanced and Mainstay Large into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between James Balanced Golden and Mainstay Large Cap, you can compare the effects of market volatilities on James Balanced and Mainstay Large 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 James Balanced with a short position of Mainstay Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of James Balanced and Mainstay Large.

Diversification Opportunities for James Balanced and Mainstay Large

0.77

Correlation Coefficient

James Balanced  Mainstay Large

Poor diversification

The 3 months correlation between James and Mainstay is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding James Balanced Golden and Mainstay Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Large Cap and James Balanced 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 James Balanced Golden are associated (or correlated) with Mainstay Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Large Cap has no effect on the direction of James Balanced i.e., James Balanced and Mainstay Large go up and down completely randomly.

Pair Corralation between James Balanced and Mainstay Large

Assuming the 90 days horizon James Balanced is expected to generate 3.92 times less return on investment than Mainstay Large. But when comparing it to its historical volatility, James Balanced Golden is 2.71 times less risky than Mainstay Large. It trades about 0.14 of its potential returns per unit of risk. Mainstay Large Cap is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  575.00  in Mainstay Large Cap on September 4, 2024 and sell it today you would earn a total of  82.00  from holding Mainstay Large Cap or generate 14.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

James Balanced Golden  vs.  Mainstay Large Cap

James Balanced Golden

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in James Balanced Golden are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, James Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mainstay Large Cap

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay Large Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Mainstay Large showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with James Balanced and Mainstay Large

The main advantage of trading using opposite James Balanced and Mainstay Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if James Balanced position performs unexpectedly, Mainstay Large 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 Large will offset losses from the drop in Mainstay Large's long position.

The idea behind James Balanced Golden and Mainstay Large Cap 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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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.