Correlation Between FirstCash and Main Street

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

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

Diversification Opportunities for FirstCash and Main Street

0.04

Correlation Coefficient

FirstCash  Main Street

Significant diversification

The 3 months correlation between FirstCash and Main is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding FirstCash 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 FirstCash 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 FirstCash 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 FirstCash i.e., FirstCash and Main Street go up and down completely randomly.

Pair Corralation between FirstCash and Main Street

Given the investment horizon of 90 days FirstCash is expected to generate 0.91 times more return on investment than Main Street. However, FirstCash is 1.1 times less risky than Main Street. It trades about 0.2 of its potential returns per unit of risk. Main Street Capital is currently generating about 0.0 per unit of risk. If you would invest  10,262  in FirstCash on December 28, 2024 and sell it today you would earn a total of  1,674  from holding FirstCash or generate 16.31% return on investment over 90 days.

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

FirstCash  vs.  Main Street Capital

FirstCash

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FirstCash are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, FirstCash unveiled solid returns over the last few months and may actually be approaching a breakup point.

Main Street Capital

Risk-Adjusted Performance

Weak

Over the last 90 days Main Street Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Main Street is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FirstCash and Main Street

The main advantage of trading using opposite FirstCash and Main Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstCash 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 FirstCash 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.