Correlation Between Stepstone and Main Street
Can any of the company-specific risk be diversified away by investing in both Stepstone and Main Street 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 Stepstone and Main Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepstone Group and Main Street Capital, you can compare the effects of market volatilities on Stepstone and Main Street 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 Stepstone with a short position of Main Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepstone and Main Street.
Diversification Opportunities for Stepstone and Main Street
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Stepstone and Main is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Main Street Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Street Capital and Stepstone 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 Stepstone Group are associated (or correlated) with Main Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Street Capital has no effect on the direction of Stepstone i.e., Stepstone and Main Street go up and down completely randomly.
Pair Corralation between Stepstone and Main Street
Given the investment horizon of 90 days Stepstone Group is expected to generate 3.47 times more return on investment than Main Street. However, Stepstone is 3.47 times more volatile than Main Street Capital. It trades about 0.14 of its potential returns per unit of risk. Main Street Capital is currently generating about 0.22 per unit of risk. If you would invest 6,158 in Stepstone Group on August 27, 2024 and sell it today you would earn a total of 547.00 from holding Stepstone Group or generate 8.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepstone Group vs. Main Street Capital
Performance |
| Timeline |
| Stepstone Group |
| Main Street Capital |
Stepstone and Main Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepstone and Main Street
The main advantage of trading using opposite Stepstone and Main Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone position performs unexpectedly, Main Street 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 Main Street will offset losses from the drop in Main Street's long position.| Stepstone vs. Munivest Fund | Stepstone vs. Blackrock Muniyield Quality | Stepstone vs. Federated Investors B | Stepstone vs. Federated Premier Municipal |
| Main Street vs. Gladstone Capital | Main Street vs. PennantPark Floating Rate | Main Street vs. Horizon Technology Finance | Main Street vs. Prospect 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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