Correlation Between Mainstay Balanced and Wells Fargo

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

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

Diversification Opportunities for Mainstay Balanced and Wells Fargo

0.55

Correlation Coefficient

Mainstay Balanced  Wells Fargo

Very weak diversification

The 3 months correlation between Mainstay and Wells is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Mainstay Balanced Fund and Wells Fargo Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Funds and Mainstay 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 Mainstay Balanced Fund are associated (or correlated) with Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo Funds has no effect on the direction of Mainstay Balanced i.e., Mainstay Balanced and Wells Fargo go up and down completely randomly.

Pair Corralation between Mainstay Balanced and Wells Fargo

Assuming the 90 days horizon Mainstay Balanced Fund is expected to generate 3.34 times more return on investment than Wells Fargo. However, Mainstay Balanced is 3.34 times more volatile than Wells Fargo Funds. It trades about 0.12 of its potential returns per unit of risk. Wells Fargo Funds is currently generating about 0.13 per unit of risk. If you would invest  3,127  in Mainstay Balanced Fund on September 4, 2024 and sell it today you would earn a total of  104.00  from holding Mainstay Balanced Fund or generate 3.33% return on investment over 90 days.

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

Mainstay Balanced Fund  vs.  Wells Fargo Funds

Mainstay Balanced

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay Balanced Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Mainstay Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wells Fargo Funds

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Funds are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Wells Fargo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mainstay Balanced and Wells Fargo

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

The idea behind Mainstay Balanced Fund and Wells Fargo Funds 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.