Correlation Between BlackRock and Main Street

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

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

Diversification Opportunities for BlackRock and Main Street

0.94

Correlation Coefficient

BlackRock  Main Street

Almost no diversification

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

Pair Corralation between BlackRock and Main Street

Considering the 90-day investment horizon BlackRock is expected to generate 1.4 times more return on investment than Main Street. However, BlackRock is 1.4 times more volatile than Main Street Capital. It trades about 0.24 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  94,067  in BlackRock on August 7, 2024 and sell it today you would earn a total of  5,083  from holding BlackRock or generate 5.4% return on investment over 90 days.

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

BlackRock  vs.  Main Street Capital

BlackRock

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, BlackRock disclosed solid returns over the last few months and may actually be approaching a breakup point.

Main Street Capital

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Capital are ranked lower than 10 (%) 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 BlackRock and Main Street

The main advantage of trading using opposite BlackRock and Main Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock 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 BlackRock 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .