Correlation Between Main Street and Auckland International

Can any of the company-specific risk be diversified away by investing in both Main Street and Auckland International 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 Auckland International 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 Auckland International Airport, you can compare the effects of market volatilities on Main Street and Auckland International 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 Auckland International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Auckland International.

Diversification Opportunities for Main Street and Auckland International

0.52

Correlation Coefficient

Main Street  Auckland International

Very weak diversification

The 3 months correlation between Main and Auckland is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Auckland International Airport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auckland International 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 Auckland International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auckland International has no effect on the direction of Main Street i.e., Main Street and Auckland International go up and down completely randomly.

Pair Corralation between Main Street and Auckland International

Given the investment horizon of 90 days Main Street Capital is expected to under-perform the Auckland International. But the stock apears to be less risky and, when comparing its historical volatility, Main Street Capital is 1.71 times less risky than Auckland International. The stock trades about 0.0 of its potential returns per unit of risk. The Auckland International Airport is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,183  in Auckland International Airport on December 30, 2024 and sell it today you would earn a total of  99.00  from holding Auckland International Airport or generate 4.54% return on investment over 90 days.

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

Main Street Capital  vs.  Auckland International Airport

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.

Auckland International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Auckland International Airport are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Auckland International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Main Street and Auckland International

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

The idea behind Main Street Capital and Auckland International Airport 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.