Correlation Between Main Street and Sipp Industries

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

Diversification Opportunities for Main Street and Sipp Industries

0.0

Correlation Coefficient

Main Street  Sipp Industries

Pay attention - limited upside

The 3 months correlation between Main and Sipp is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Sipp Industries New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sipp Industries New 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 Sipp Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sipp Industries New has no effect on the direction of Main Street i.e., Main Street and Sipp Industries go up and down completely randomly.

Pair Corralation between Main Street and Sipp Industries

If you would invest  4,848  in Main Street Capital on September 4, 2024 and sell it today you would earn a total of  687.00  from holding Main Street Capital or generate 14.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Main Street Capital  vs.  Sipp Industries New

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.

Sipp Industries New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sipp Industries New has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Sipp Industries 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 Sipp Industries

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

The idea behind Main Street Capital and Sipp Industries New 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.