Correlation Between Main Street and Aerius International

Can any of the company-specific risk be diversified away by investing in both Main Street and Aerius International 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 Aerius International 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 Aerius International, you can compare the effects of market volatilities on Main Street and Aerius International 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 Aerius International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Aerius International.

Diversification Opportunities for Main Street and Aerius International

-0.34

Correlation Coefficient

Main Street  Aerius International

Very good diversification

The 3 months correlation between Main and Aerius is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Aerius International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerius International 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 Aerius International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerius International has no effect on the direction of Main Street i.e., Main Street and Aerius International go up and down completely randomly.

Pair Corralation between Main Street and Aerius International

Given the investment horizon of 90 days Main Street is expected to generate 7.72 times less return on investment than Aerius International. But when comparing it to its historical volatility, Main Street Capital is 36.26 times less risky than Aerius International. It trades about 0.29 of its potential returns per unit of risk. Aerius International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.24  in Aerius International on August 31, 2024 and sell it today you would lose (0.07) from holding Aerius International or give up 29.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Main Street Capital  vs.  Aerius International

Main Street Capital

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Capital are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Main Street may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Aerius International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aerius International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Aerius International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Main Street and Aerius International

The main advantage of trading using opposite Main Street and Aerius International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, Aerius International 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 Aerius International will offset losses from the drop in Aerius International's long position.

The idea behind Main Street Capital and Aerius International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.