Correlation Between Main Street and Cornerstone Strategic

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

Diversification Opportunities for Main Street and Cornerstone Strategic

0.67

Correlation Coefficient

Main Street  Cornerstone Strategic

Poor diversification

The 3 months correlation between Main and Cornerstone is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Cornerstone Strategic Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cornerstone Strategic 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 Cornerstone Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cornerstone Strategic has no effect on the direction of Main Street i.e., Main Street and Cornerstone Strategic go up and down completely randomly.

Pair Corralation between Main Street and Cornerstone Strategic

Given the investment horizon of 90 days Main Street Capital is expected to generate 0.93 times more return on investment than Cornerstone Strategic. However, Main Street Capital is 1.07 times less risky than Cornerstone Strategic. It trades about 0.0 of its potential returns per unit of risk. Cornerstone Strategic Value is currently generating about -0.1 per unit of risk. If you would invest  5,699  in Main Street Capital on December 29, 2024 and sell it today you would lose (33.00) from holding Main Street Capital or give up 0.58% of portfolio value over 90 days.

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

Main Street Capital  vs.  Cornerstone Strategic Value

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.

Cornerstone Strategic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cornerstone Strategic Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Pair Trading with Main Street and Cornerstone Strategic

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

The idea behind Main Street Capital and Cornerstone Strategic Value 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.