Correlation Between Main Street and Fidus Investment
Can any of the company-specific risk be diversified away by investing in both Main Street and Fidus 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 Fidus 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 Fidus Investment Corp, you can compare the effects of market volatilities on Main Street and Fidus 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 Fidus Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Fidus Investment.
Diversification Opportunities for Main Street and Fidus Investment
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Main and Fidus is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Fidus Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidus Investment Corp 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 Fidus Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidus Investment Corp has no effect on the direction of Main Street i.e., Main Street and Fidus Investment go up and down completely randomly.
Pair Corralation between Main Street and Fidus Investment
Given the investment horizon of 90 days Main Street is expected to generate 1.2 times less return on investment than Fidus Investment. In addition to that, Main Street is 1.04 times more volatile than Fidus Investment Corp. It trades about 0.3 of its total potential returns per unit of risk. Fidus Investment Corp is currently generating about 0.38 per unit of volatility. If you would invest 1,966 in Fidus Investment Corp on August 29, 2024 and sell it today you would earn a total of 140.00 from holding Fidus Investment Corp or generate 7.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Main Street Capital vs. Fidus Investment Corp
Performance |
| Timeline |
| Main Street Capital |
| Fidus Investment Corp |
Main Street and Fidus Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and Fidus Investment
The main advantage of trading using opposite Main Street and Fidus Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, Fidus 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 Fidus Investment will offset losses from the drop in Fidus 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 |
| Fidus Investment vs. Golub Capital BDC | Fidus Investment vs. BlackRock TCP Capital | Fidus Investment vs. Carlyle Secured Lending | Fidus Investment vs. Sixth Street Specialty |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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