Correlation Between American High-income and Mainstay High

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

By analyzing existing cross correlation between American High Income Municipal and Mainstay High Yield, you can compare the effects of market volatilities on American High-income and Mainstay High 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 American High-income with a short position of Mainstay High. Check out your portfolio center. Please also check ongoing floating volatility patterns of American High-income and Mainstay High.

Diversification Opportunities for American High-income and Mainstay High

0.95

Correlation Coefficient

American High-income  Mainstay High

Almost no diversification

The 3 months correlation between American and Mainstay is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding American High Income Municipal and Mainstay High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay High Yield and American High-income 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 American High Income Municipal are associated (or correlated) with Mainstay High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay High Yield has no effect on the direction of American High-income i.e., American High-income and Mainstay High go up and down completely randomly.

Pair Corralation between American High-income and Mainstay High

Assuming the 90 days horizon American High Income Municipal is expected to generate 0.97 times more return on investment than Mainstay High. However, American High Income Municipal is 1.03 times less risky than Mainstay High. It trades about 0.2 of its potential returns per unit of risk. Mainstay High Yield is currently generating about 0.15 per unit of risk. If you would invest  1,482  in American High Income Municipal on February 24, 2024 and sell it today you would earn a total of  13.00  from holding American High Income Municipal or generate 0.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

American High Income Municipal  vs.  Mainstay High Yield

American High Income

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American High Income Municipal are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, American High-income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mainstay High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mainstay High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Mainstay High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American High-income and Mainstay High

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

The idea behind American High Income Municipal and Mainstay High Yield 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.