Correlation Between Gladstone Capital and Main Street

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

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

Diversification Opportunities for Gladstone Capital and Main Street

0.93

Correlation Coefficient

Gladstone Capital  Main Street

Almost no diversification

The 3 months correlation between Gladstone and Main is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Capital 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 Gladstone Capital 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 Gladstone Capital 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 Gladstone Capital i.e., Gladstone Capital and Main Street go up and down completely randomly.

Pair Corralation between Gladstone Capital and Main Street

Given the investment horizon of 90 days Gladstone Capital is expected to under-perform the Main Street. In addition to that, Gladstone Capital is 1.31 times more volatile than Main Street Capital. It trades about -0.17 of its total potential returns per unit of risk. Main Street Capital is currently generating about -0.03 per unit of volatility. If you would invest  6,047  in Main Street Capital on November 28, 2024 and sell it today you would lose (41.00) from holding Main Street Capital or give up 0.68% of portfolio value over 90 days.

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

Gladstone Capital  vs.  Main Street Capital

Gladstone Capital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Capital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Gladstone Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Main Street Capital

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Main Street may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Gladstone Capital and Main Street

The main advantage of trading using opposite Gladstone Capital and Main Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gladstone Capital 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 Gladstone Capital 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.