Correlation Between Affiliated Managers and Main Street

Can any of the company-specific risk be diversified away by investing in both Affiliated Managers 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 Affiliated Managers and Main Street into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Affiliated Managers Group and Main Street Capital, you can compare the effects of market volatilities on Affiliated Managers 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 Affiliated Managers with a short position of Main Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affiliated Managers and Main Street.

Diversification Opportunities for Affiliated Managers and Main Street

0.94

Correlation Coefficient

Affiliated Managers  Main Street

Almost no diversification

The 3 months correlation between Affiliated and Main is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Affiliated Managers 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 Affiliated Managers 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 Affiliated Managers 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 Affiliated Managers i.e., Affiliated Managers and Main Street go up and down completely randomly.

Pair Corralation between Affiliated Managers and Main Street

Considering the 90-day investment horizon Affiliated Managers Group is expected to generate 3.1 times more return on investment than Main Street. However, Affiliated Managers is 3.1 times more volatile than Main Street Capital. It trades about -0.01 of its potential returns per unit of risk. Main Street Capital is currently generating about -0.09 per unit of risk. If you would invest  17,938  in Affiliated Managers Group on August 7, 2024 and sell it today you would lose (232.00) from holding Affiliated Managers Group or give up 1.29% of portfolio value over 90 days.

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

Affiliated Managers Group  vs.  Main Street Capital

Affiliated Managers

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Affiliated Managers Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Affiliated Managers may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Main Street Capital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Capital are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Main Street is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Affiliated Managers and Main Street

The main advantage of trading using opposite Affiliated Managers and Main Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affiliated Managers 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.

The idea behind Affiliated Managers Group and Main Street Capital 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.