Correlation Between Main Street and Aeroports

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

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

Diversification Opportunities for Main Street and Aeroports

-0.41

Correlation Coefficient

Main Street  Aeroports

Very good diversification

The 3 months correlation between Main and Aeroports is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Aeroports de Paris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeroports de Paris and Main Street 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 Main Street Capital are associated (or correlated) with Aeroports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeroports de Paris has no effect on the direction of Main Street i.e., Main Street and Aeroports go up and down completely randomly.

Pair Corralation between Main Street and Aeroports

Given the investment horizon of 90 days Main Street Capital is expected to under-perform the Aeroports. But the stock apears to be less risky and, when comparing its historical volatility, Main Street Capital is 1.66 times less risky than Aeroports. The stock trades about 0.0 of its potential returns per unit of risk. The Aeroports de Paris is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,156  in Aeroports de Paris on December 29, 2024 and sell it today you would earn a total of  74.00  from holding Aeroports de Paris or generate 6.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Main Street Capital  vs.  Aeroports de Paris

Main Street Capital

Risk-Adjusted Performance

Very 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 latest stock price disarray, may contribute to short-term losses for the investors.

Aeroports de Paris

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aeroports de Paris are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Aeroports may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Main Street and Aeroports

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

The idea behind Main Street Capital and Aeroports de Paris 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.