Correlation Between Main Street and Ares Capital
Can any of the company-specific risk be diversified away by investing in both Main Street and Ares 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 Ares 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 Ares Capital, you can compare the effects of market volatilities on Main Street and Ares 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 Ares Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Ares Capital.
Diversification Opportunities for Main Street and Ares Capital
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Main and Ares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Ares Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Capital 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 Ares Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Capital has no effect on the direction of Main Street i.e., Main Street and Ares Capital go up and down completely randomly.
Pair Corralation between Main Street and Ares Capital
Given the investment horizon of 90 days Main Street Capital is expected to generate 1.0 times more return on investment than Ares Capital. However, Main Street is 1.0 times more volatile than Ares Capital. It trades about 0.11 of its potential returns per unit of risk. Ares Capital is currently generating about 0.07 per unit of risk. If you would invest 3,147 in Main Street Capital on August 24, 2024 and sell it today you would earn a total of 2,171 from holding Main Street Capital or generate 68.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Main Street Capital vs. Ares Capital
Performance |
| Timeline |
| Main Street Capital |
| Ares Capital |
Main Street and Ares Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and Ares Capital
The main advantage of trading using opposite Main Street and Ares Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, Ares 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 Ares Capital will offset losses from the drop in Ares Capital's long position.| Main Street vs. Gladstone Capital | Main Street vs. PennantPark Floating Rate | Main Street vs. Horizon Technology Finance | Main Street vs. Prospect Capital |
| Ares Capital vs. Triplepoint Venture Growth | Ares Capital vs. Sixth Street Specialty | Ares Capital vs. Main Street Capital | Ares Capital vs. Capital Southwest |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |