Correlation Between Main Street and Westwood Holdings
Can any of the company-specific risk be diversified away by investing in both Main Street and Westwood Holdings 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 Westwood Holdings 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 Westwood Holdings Group, you can compare the effects of market volatilities on Main Street and Westwood Holdings 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 Westwood Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Westwood Holdings.
Diversification Opportunities for Main Street and Westwood Holdings
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Main and Westwood is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Westwood Holdings Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Holdings 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 Westwood Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Holdings has no effect on the direction of Main Street i.e., Main Street and Westwood Holdings go up and down completely randomly.
Pair Corralation between Main Street and Westwood Holdings
Given the investment horizon of 90 days Main Street Capital is expected to generate 0.37 times more return on investment than Westwood Holdings. However, Main Street Capital is 2.72 times less risky than Westwood Holdings. It trades about 0.12 of its potential returns per unit of risk. Westwood Holdings Group is currently generating about 0.04 per unit of risk. If you would invest 3,158 in Main Street Capital on September 2, 2024 and sell it today you would earn a total of 2,389 from holding Main Street Capital or generate 75.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Main Street Capital vs. Westwood Holdings Group
Performance |
| Timeline |
| Main Street Capital |
| Westwood Holdings |
Main Street and Westwood Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Main Street and Westwood Holdings
The main advantage of trading using opposite Main Street and Westwood Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, Westwood Holdings 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 Westwood Holdings will offset losses from the drop in Westwood Holdings' long position.| Main Street vs. Gladstone Capital | Main Street vs. PennantPark Floating Rate | Main Street vs. Horizon Technology Finance | Main Street vs. Prospect Capital |
| Westwood Holdings vs. MFS Investment Grade | Westwood Holdings vs. Eaton Vance National | Westwood Holdings vs. Invesco Trust For | Westwood Holdings vs. Invesco California Value |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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