Correlation Between Main Street and Pembina Pipeline
Can any of the company-specific risk be diversified away by investing in both Main Street and Pembina Pipeline 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 Pembina Pipeline 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 Pembina Pipeline Corp, you can compare the effects of market volatilities on Main Street and Pembina Pipeline 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 Pembina Pipeline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Pembina Pipeline.
Diversification Opportunities for Main Street and Pembina Pipeline
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Main and Pembina is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of Main Street i.e., Main Street and Pembina Pipeline go up and down completely randomly.
Pair Corralation between Main Street and Pembina Pipeline
Given the investment horizon of 90 days Main Street Capital is expected to generate 0.75 times more return on investment than Pembina Pipeline. However, Main Street Capital is 1.33 times less risky than Pembina Pipeline. It trades about 0.22 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.08 per unit of risk. If you would invest 5,178 in Main Street Capital on August 27, 2024 and sell it today you would earn a total of 219.00 from holding Main Street Capital or generate 4.23% 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. Pembina Pipeline Corp
Performance |
| Timeline |
| Main Street Capital |
| Pembina Pipeline Corp |
Main Street and Pembina Pipeline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and Pembina Pipeline
The main advantage of trading using opposite Main Street and Pembina Pipeline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, Pembina Pipeline 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 Pembina Pipeline will offset losses from the drop in Pembina Pipeline'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 |
| Pembina Pipeline vs. LTC Properties | Pembina Pipeline vs. Main Street Capital | Pembina Pipeline vs. STAG Industrial | Pembina Pipeline vs. Gladstone Investment |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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