Correlation Between Main Street and Victory Sycamore

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

Diversification Opportunities for Main Street and Victory Sycamore

0.47

Correlation Coefficient

Main Street  Victory Sycamore

Very weak diversification

The 3 months correlation between Main and Victory is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and Victory Sycamore Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Sycamore Small 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 Victory Sycamore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Sycamore Small has no effect on the direction of Main Street i.e., Main Street and Victory Sycamore go up and down completely randomly.

Pair Corralation between Main Street and Victory Sycamore

Given the investment horizon of 90 days Main Street Capital is expected to generate 0.7 times more return on investment than Victory Sycamore. However, Main Street Capital is 1.42 times less risky than Victory Sycamore. It trades about 0.18 of its potential returns per unit of risk. Victory Sycamore Small is currently generating about 0.01 per unit of risk. If you would invest  4,440  in Main Street Capital on January 24, 2024 and sell it today you would earn a total of  376.00  from holding Main Street Capital or generate 8.47% return on investment over 90 days.

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

Main Street Capital  vs.  Victory Sycamore Small

Main Street Capital

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Capital are ranked lower than 14 (%) 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 May 2024.

Victory Sycamore Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Victory Sycamore Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Victory Sycamore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Main Street and Victory Sycamore

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

The idea behind Main Street Capital and Victory Sycamore Small 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.