Correlation Between Main Street and SLR Investment

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

Diversification Opportunities for Main Street and SLR Investment

0.67

Correlation Coefficient

Main Street  SLR Investment

Poor diversification

The 3 months correlation between Main and SLR is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and SLR Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLR Investment Corp 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 SLR Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLR Investment Corp has no effect on the direction of Main Street i.e., Main Street and SLR Investment go up and down completely randomly.

Pair Corralation between Main Street and SLR Investment

Given the investment horizon of 90 days Main Street Capital is expected to generate 1.16 times more return on investment than SLR Investment. However, Main Street is 1.16 times more volatile than SLR Investment Corp. It trades about 0.34 of its potential returns per unit of risk. SLR Investment Corp is currently generating about 0.12 per unit of risk. If you would invest  5,213  in Main Street Capital on May 4, 2025 and sell it today you would earn a total of  1,186  from holding Main Street Capital or generate 22.75% return on investment over 90 days.

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

Main Street Capital  vs.  SLR Investment Corp

Main Street Capital

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Capital are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal forward indicators, Main Street displayed solid returns over the last few months and may actually be approaching a breakup point.

SLR Investment Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SLR Investment Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, SLR Investment is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Main Street and SLR Investment

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

The idea behind Main Street Capital and SLR Investment Corp 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.