Correlation Between Main Street and Royalty Management
Can any of the company-specific risk be diversified away by investing in both Main Street and Royalty Management 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 Royalty Management 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 Royalty Management Holding, you can compare the effects of market volatilities on Main Street and Royalty Management 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 Royalty Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Royalty Management.
Diversification Opportunities for Main Street and Royalty Management
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Main and Royalty is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Royalty Management Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royalty Management 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 Royalty Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royalty Management has no effect on the direction of Main Street i.e., Main Street and Royalty Management go up and down completely randomly.
Pair Corralation between Main Street and Royalty Management
Given the investment horizon of 90 days Main Street is expected to generate 12.07 times less return on investment than Royalty Management. But when comparing it to its historical volatility, Main Street Capital is 51.6 times less risky than Royalty Management. It trades about 0.47 of its potential returns per unit of risk. Royalty Management Holding is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1.10 in Royalty Management Holding on September 12, 2024 and sell it today you would earn a total of 0.02 from holding Royalty Management Holding or generate 1.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 59.09% |
| Values | Daily Returns |
Main Street Capital vs. Royalty Management Holding
Performance |
| Timeline |
| Main Street Capital |
| Royalty Management |
Main Street and Royalty Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and Royalty Management
The main advantage of trading using opposite Main Street and Royalty Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, Royalty Management 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 Royalty Management will offset losses from the drop in Royalty Management'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 |
| Royalty Management vs. Stellus Capital Investment | Royalty Management vs. Prospect Capital | Royalty Management vs. Gladstone Capital | Royalty Management 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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