Correlation Between Main Street and Eco Depot
Can any of the company-specific risk be diversified away by investing in both Main Street and Eco Depot 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 Eco Depot 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 Eco Depot, you can compare the effects of market volatilities on Main Street and Eco Depot 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 Eco Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Eco Depot.
Diversification Opportunities for Main Street and Eco Depot
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Main and Eco is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Eco Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Depot 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 Eco Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Depot has no effect on the direction of Main Street i.e., Main Street and Eco Depot go up and down completely randomly.
Pair Corralation between Main Street and Eco Depot
Given the investment horizon of 90 days Main Street is expected to generate 1.83 times less return on investment than Eco Depot. But when comparing it to its historical volatility, Main Street Capital is 16.28 times less risky than Eco Depot. It trades about 0.17 of its potential returns per unit of risk. Eco Depot is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 20.00 in Eco Depot on September 2, 2024 and sell it today you would lose (16.40) from holding Eco Depot or give up 82.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Main Street Capital vs. Eco Depot
Performance |
| Timeline |
| Main Street Capital |
| Eco Depot |
Main Street and Eco Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and Eco Depot
The main advantage of trading using opposite Main Street and Eco Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, Eco Depot 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 Eco Depot will offset losses from the drop in Eco Depot'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 |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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