Correlation Between Main Street and Rand Capital
Can any of the company-specific risk be diversified away by investing in both Main Street and Rand Capital 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 Rand Capital 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 Rand Capital Corp, you can compare the effects of market volatilities on Main Street and Rand Capital 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 Rand Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Rand Capital.
Diversification Opportunities for Main Street and Rand Capital
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Main and Rand is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Rand Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rand Capital 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 Rand Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rand Capital Corp has no effect on the direction of Main Street i.e., Main Street and Rand Capital go up and down completely randomly.
Pair Corralation between Main Street and Rand Capital
Given the investment horizon of 90 days Main Street is expected to generate 5.3 times less return on investment than Rand Capital. But when comparing it to its historical volatility, Main Street Capital is 7.35 times less risky than Rand Capital. It trades about 0.47 of its potential returns per unit of risk. Rand Capital Corp is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 1,640 in Rand Capital Corp on September 12, 2024 and sell it today you would earn a total of 468.00 from holding Rand Capital Corp or generate 28.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Main Street Capital vs. Rand Capital Corp
Performance |
| Timeline |
| Main Street Capital |
| Rand Capital Corp |
Main Street and Rand Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and Rand Capital
The main advantage of trading using opposite Main Street and Rand Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, Rand Capital 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 Rand Capital will offset losses from the drop in Rand Capital'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 |
| Rand Capital vs. Stellus Capital Investment | Rand Capital vs. Prospect Capital | Rand Capital vs. Gladstone Capital | Rand Capital vs. Main Street 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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