Correlation Between Carlyle and Main Street

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

By analyzing existing cross correlation between Carlyle Group and Main Street Capital, you can compare the effects of market volatilities on Carlyle and Main Street 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 Carlyle with a short position of Main Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlyle and Main Street.

Diversification Opportunities for Carlyle and Main Street

0.91

Correlation Coefficient

Carlyle  Main Street

Almost no diversification

The 3 months correlation between Carlyle and Main is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and Main Street Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Street Capital and Carlyle 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 Carlyle Group are associated (or correlated) with Main Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Street Capital has no effect on the direction of Carlyle i.e., Carlyle and Main Street go up and down completely randomly.

Pair Corralation between Carlyle and Main Street

Allowing for the 90-day total investment horizon Carlyle Group is expected to generate 3.1 times more return on investment than Main Street. However, Carlyle is 3.1 times more volatile than Main Street Capital. It trades about 0.25 of its potential returns per unit of risk. Main Street Capital is currently generating about 0.31 per unit of risk. If you would invest  3,822  in Carlyle Group on September 1, 2024 and sell it today you would earn a total of  1,501  from holding Carlyle Group or generate 39.27% return on investment over 90 days.

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

Carlyle Group  vs.  Main Street Capital

Carlyle Group

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

Main Street Capital

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Capital are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Main Street displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carlyle and Main Street

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

The idea behind Carlyle Group and Main Street Capital 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.