Correlation Between Main Street and Principal Financial
Can any of the company-specific risk be diversified away by investing in both Main Street and Principal Financial 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 Principal Financial 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 Principal Financial Group, you can compare the effects of market volatilities on Main Street and Principal Financial 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 Principal Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Principal Financial.
Diversification Opportunities for Main Street and Principal Financial
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Main and Principal is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Principal Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Financial 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 Principal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Financial has no effect on the direction of Main Street i.e., Main Street and Principal Financial go up and down completely randomly.
Pair Corralation between Main Street and Principal Financial
Given the investment horizon of 90 days Main Street Capital is expected to generate 0.68 times more return on investment than Principal Financial. However, Main Street Capital is 1.47 times less risky than Principal Financial. It trades about 0.16 of its potential returns per unit of risk. Principal Financial Group is currently generating about 0.07 per unit of risk. If you would invest 3,796 in Main Street Capital on August 24, 2024 and sell it today you would earn a total of 1,522 from holding Main Street Capital or generate 40.09% 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. Principal Financial Group
Performance |
| Timeline |
| Main Street Capital |
| Principal Financial |
Main Street and Principal Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and Principal Financial
The main advantage of trading using opposite Main Street and Principal Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, Principal Financial 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 Principal Financial will offset losses from the drop in Principal Financial'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 |
| Principal Financial vs. State Street Corp | Principal Financial vs. Bank of New | Principal Financial vs. SEI Investments | Principal Financial vs. Affiliated Managers Group |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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