Correlation Between Main Street and Golub Capital

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

Diversification Opportunities for Main Street and Golub Capital

0.82

Correlation Coefficient

Main Street  Golub Capital

Very poor diversification

The 3 months correlation between Main and Golub is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Golub Capital BDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golub Capital BDC 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 Golub Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golub Capital BDC has no effect on the direction of Main Street i.e., Main Street and Golub Capital go up and down completely randomly.

Pair Corralation between Main Street and Golub Capital

Given the investment horizon of 90 days Main Street is expected to generate 2.18 times less return on investment than Golub Capital. In addition to that, Main Street is 1.62 times more volatile than Golub Capital BDC. It trades about 0.02 of its total potential returns per unit of risk. Golub Capital BDC is currently generating about 0.07 per unit of volatility. If you would invest  1,487  in Golub Capital BDC on December 27, 2024 and sell it today you would earn a total of  50.00  from holding Golub Capital BDC or generate 3.36% 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.  Golub Capital BDC

Main Street Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Main Street is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Golub Capital BDC

Risk-Adjusted Performance

Modest

Over the last 90 days Golub Capital BDC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Golub Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Main Street and Golub Capital

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

The idea behind Main Street Capital and Golub Capital BDC 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.