Correlation Between Main Street and Blackstone

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

Diversification Opportunities for Main Street and Blackstone

0.9

Correlation Coefficient

Main Street  Blackstone

Almost no diversification

The 3 months correlation between Main and Blackstone is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Blackstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackstone Group 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 Blackstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackstone Group has no effect on the direction of Main Street i.e., Main Street and Blackstone go up and down completely randomly.

Pair Corralation between Main Street and Blackstone

Given the investment horizon of 90 days Main Street is expected to generate 1.58 times less return on investment than Blackstone. But when comparing it to its historical volatility, Main Street Capital is 2.16 times less risky than Blackstone. It trades about 0.14 of its potential returns per unit of risk. Blackstone Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  10,252  in Blackstone Group on September 10, 2024 and sell it today you would earn a total of  8,448  from holding Blackstone Group or generate 82.4% return on investment over 90 days.

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

Main Street Capital  vs.  Blackstone Group

Main Street Capital

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Capital are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Main Street displayed solid returns over the last few months and may actually be approaching a breakup point.

Blackstone Group

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blackstone Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Blackstone showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Main Street and Blackstone

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

The idea behind Main Street Capital and Blackstone Group 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.