Correlation Between Main Street and Trinity Capital
Can any of the company-specific risk be diversified away by investing in both Main Street and Trinity 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 Trinity 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 Trinity Capital, you can compare the effects of market volatilities on Main Street and Trinity 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 Trinity Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and Trinity Capital.
Diversification Opportunities for Main Street and Trinity Capital
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Main and Trinity is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Trinity Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinity Capital 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 Trinity Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinity Capital has no effect on the direction of Main Street i.e., Main Street and Trinity Capital go up and down completely randomly.
Pair Corralation between Main Street and Trinity Capital
Given the investment horizon of 90 days Main Street Capital is expected to generate 0.59 times more return on investment than Trinity Capital. However, Main Street Capital is 1.69 times less risky than Trinity Capital. It trades about 0.13 of its potential returns per unit of risk. Trinity Capital is currently generating about 0.07 per unit of risk. If you would invest 3,139 in Main Street Capital on September 25, 2024 and sell it today you would earn a total of 2,501 from holding Main Street Capital or generate 79.68% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Main Street Capital vs. Trinity Capital
Performance |
Timeline |
Main Street Capital |
Trinity Capital |
Main Street and Trinity Capital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Main Street and Trinity Capital
The main advantage of trading using opposite Main Street and Trinity Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, Trinity 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 Trinity Capital will offset losses from the drop in Trinity 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 |
Trinity Capital vs. Carlyle Secured Lending | Trinity Capital vs. Sixth Street Specialty | Trinity Capital vs. Hercules Capital | Trinity Capital vs. BlackRock TCP 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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