Correlation Between Main Street and BlackRock
Can any of the company-specific risk be diversified away by investing in both Main Street and BlackRock 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 BlackRock 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 BlackRock, you can compare the effects of market volatilities on Main Street and BlackRock 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 BlackRock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and BlackRock.
Diversification Opportunities for Main Street and BlackRock
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Main and BlackRock is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock 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 BlackRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock has no effect on the direction of Main Street i.e., Main Street and BlackRock go up and down completely randomly.
Pair Corralation between Main Street and BlackRock
Given the investment horizon of 90 days Main Street is expected to generate 1.22 times less return on investment than BlackRock. But when comparing it to its historical volatility, Main Street Capital is 1.36 times less risky than BlackRock. It trades about 0.17 of its potential returns per unit of risk. BlackRock is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 62,027 in BlackRock on September 6, 2024 and sell it today you would earn a total of 41,473 from holding BlackRock or generate 66.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Main Street Capital vs. BlackRock
Performance |
Timeline |
Main Street Capital |
BlackRock |
Main Street and BlackRock Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Main Street and BlackRock
The main advantage of trading using opposite Main Street and BlackRock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, BlackRock 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 BlackRock will offset losses from the drop in BlackRock's long position.Main Street vs. Gladstone Capital | Main Street vs. PennantPark Floating Rate | Main Street vs. Horizon Technology Finance | Main Street vs. Prospect Capital |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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