Correlation Between GM and Mainstay Tax

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

By analyzing existing cross correlation between General Motors and Mainstay Tax Advantaged, you can compare the effects of market volatilities on GM and Mainstay Tax 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 GM with a short position of Mainstay Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Mainstay Tax.

Diversification Opportunities for GM and Mainstay Tax

-0.52

Correlation Coefficient

GM  Mainstay Tax

Excellent diversification

The 3 months correlation between GM and Mainstay is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Mainstay Tax Advantaged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Tax Advantaged and GM 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 General Motors are associated (or correlated) with Mainstay Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Tax Advantaged has no effect on the direction of GM i.e., GM and Mainstay Tax go up and down completely randomly.

Pair Corralation between GM and Mainstay Tax

Allowing for the 90-day total investment horizon General Motors is expected to generate 26.54 times more return on investment than Mainstay Tax. However, GM is 26.54 times more volatile than Mainstay Tax Advantaged. It trades about 0.1 of its potential returns per unit of risk. Mainstay Tax Advantaged is currently generating about 0.02 per unit of risk. If you would invest  4,829  in General Motors on August 31, 2024 and sell it today you would earn a total of  721.00  from holding General Motors or generate 14.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

General Motors  vs.  Mainstay Tax Advantaged

General Motors

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Mainstay Tax Advantaged

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay Tax Advantaged are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Mainstay Tax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM and Mainstay Tax

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

The idea behind General Motors and Mainstay Tax Advantaged 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.