Correlation Between Main Street and Bank of New York
Can any of the company-specific risk be diversified away by investing in both Main Street and Bank of New York 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 Bank of New York 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 Bank of New, you can compare the effects of market volatilities on Main Street and Bank of New York 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 Bank of New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Bank of New York.
Diversification Opportunities for Main Street and Bank of New York
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Main and Bank is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Bank of New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of New York 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 Bank of New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of New York has no effect on the direction of Main Street i.e., Main Street and Bank of New York go up and down completely randomly.
Pair Corralation between Main Street and Bank of New York
Given the investment horizon of 90 days Main Street Capital is expected to generate 0.75 times more return on investment than Bank of New York. However, Main Street Capital is 1.33 times less risky than Bank of New York. It trades about 0.4 of its potential returns per unit of risk. Bank of New is currently generating about 0.27 per unit of risk. If you would invest 5,109 in Main Street Capital on August 30, 2024 and sell it today you would earn a total of 391.00 from holding Main Street Capital or generate 7.65% 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. Bank of New
Performance |
| Timeline |
| Main Street Capital |
| Bank of New York |
Main Street and Bank of New York Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and Bank of New York
The main advantage of trading using opposite Main Street and Bank of New York positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, Bank of New York 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 Bank of New York will offset losses from the drop in Bank of New York'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 |
| Bank of New York vs. Northern Trust | Bank of New York vs. Invesco Plc | Bank of New York vs. Franklin Resources | Bank of New York vs. T Rowe Price |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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