Correlation Between Main Street and Mene

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

Diversification Opportunities for Main Street and Mene

0.01

Correlation Coefficient

Main Street  Mene

Significant diversification

The 3 months correlation between Main and Mene is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Mene Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mene Inc 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 Mene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mene Inc has no effect on the direction of Main Street i.e., Main Street and Mene go up and down completely randomly.

Pair Corralation between Main Street and Mene

Given the investment horizon of 90 days Main Street is expected to generate 16.84 times less return on investment than Mene. But when comparing it to its historical volatility, Main Street Capital is 5.54 times less risky than Mene. It trades about 0.03 of its potential returns per unit of risk. Mene Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7.50  in Mene Inc on December 27, 2024 and sell it today you would earn a total of  2.00  from holding Mene Inc or generate 26.67% return on investment over 90 days.

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

Main Street Capital  vs.  Mene Inc

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 2 (%) 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 latest stock price disarray, may contribute to short-term losses for the investors.

Mene Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mene Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Mene reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Main Street and Mene

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

The idea behind Main Street Capital and Mene Inc 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.