Correlation Between Main Street and Bridge Investment
Can any of the company-specific risk be diversified away by investing in both Main Street and Bridge Investment 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 Bridge Investment 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 Bridge Investment Group, you can compare the effects of market volatilities on Main Street and Bridge Investment 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 Bridge Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Bridge Investment.
Diversification Opportunities for Main Street and Bridge Investment
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Main and Bridge is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Bridge Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridge Investment 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 Bridge Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridge Investment has no effect on the direction of Main Street i.e., Main Street and Bridge Investment go up and down completely randomly.
Pair Corralation between Main Street and Bridge Investment
Given the investment horizon of 90 days Main Street is expected to generate 1.94 times less return on investment than Bridge Investment. But when comparing it to its historical volatility, Main Street Capital is 2.62 times less risky than Bridge Investment. It trades about 0.13 of its potential returns per unit of risk. Bridge Investment Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 757.00 in Bridge Investment Group on September 1, 2024 and sell it today you would earn a total of 232.00 from holding Bridge Investment Group or generate 30.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Main Street Capital vs. Bridge Investment Group
Performance |
| Timeline |
| Main Street Capital |
| Bridge Investment |
Main Street and Bridge Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and Bridge Investment
The main advantage of trading using opposite Main Street and Bridge Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, Bridge Investment 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 Bridge Investment will offset losses from the drop in Bridge Investment'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 |
| Bridge Investment vs. Federated Premier Municipal | Bridge Investment vs. Blackrock Muniyield | Bridge Investment vs. Diamond Hill Investment | Bridge Investment vs. NXG NextGen Infrastructure |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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