Correlation Between IShares GovernmentCredit and Mainstay Government

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Can any of the company-specific risk be diversified away by investing in both IShares GovernmentCredit and Mainstay Government 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 IShares GovernmentCredit and Mainstay Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IShares GovernmentCredit Bond and Mainstay Government Fund, you can compare the effects of market volatilities on IShares GovernmentCredit and Mainstay Government 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 IShares GovernmentCredit with a short position of Mainstay Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares GovernmentCredit and Mainstay Government.

Diversification Opportunities for IShares GovernmentCredit and Mainstay Government

0.55
  Correlation Coefficient

Very weak diversification

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

Pair Corralation between IShares GovernmentCredit and Mainstay Government

Considering the 90-day investment horizon IShares GovernmentCredit is expected to generate 1.51 times less return on investment than Mainstay Government. But when comparing it to its historical volatility, IShares GovernmentCredit Bond is 1.09 times less risky than Mainstay Government. It trades about 0.1 of its potential returns per unit of risk. Mainstay Government Fund is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  749.00  in Mainstay Government Fund on December 30, 2023 and sell it today you would earn a total of  6.00  from holding Mainstay Government Fund or generate 0.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

IShares GovernmentCredit Bond  vs.  MAINSTAY GOVERNMENT FUND

 Performance 
       Timeline  
IShares GovernmentCredit 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days IShares GovernmentCredit Bond has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, IShares GovernmentCredit is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Mainstay Government Fund 

Risk-Adjusted Performance

2 of 100

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

IShares GovernmentCredit and Mainstay Government Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares GovernmentCredit and Mainstay Government

The main advantage of trading using opposite IShares GovernmentCredit and Mainstay Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares GovernmentCredit position performs unexpectedly, Mainstay Government 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 Government will offset losses from the drop in Mainstay Government's long position.
The idea behind IShares GovernmentCredit Bond and Mainstay Government Fund 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.
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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