Correlation Between Main Street and Fidus Investment

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

Diversification Opportunities for Main Street and Fidus Investment

0.79

Correlation Coefficient

Main Street  Fidus Investment

Poor diversification

The 3 months correlation between Main and Fidus is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Fidus Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidus Investment Corp 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 Fidus Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidus Investment Corp has no effect on the direction of Main Street i.e., Main Street and Fidus Investment go up and down completely randomly.

Pair Corralation between Main Street and Fidus Investment

Given the investment horizon of 90 days Main Street Capital is expected to generate 0.96 times more return on investment than Fidus Investment. However, Main Street Capital is 1.05 times less risky than Fidus Investment. It trades about 0.3 of its potential returns per unit of risk. Fidus Investment Corp is currently generating about 0.17 per unit of risk. If you would invest  4,857  in Main Street Capital on September 2, 2024 and sell it today you would earn a total of  690.00  from holding Main Street Capital or generate 14.21% return on investment over 90 days.

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

Main Street Capital  vs.  Fidus Investment Corp

Main Street Capital

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Capital are ranked lower than 23 (%) 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.

Fidus Investment Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fidus Investment Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Fidus Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Main Street and Fidus Investment

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

The idea behind Main Street Capital and Fidus Investment Corp 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.