Correlation Between Main Street and First IC

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

By analyzing existing cross correlation between Main Street Financial and First IC, you can compare the effects of market volatilities on Main Street and First IC 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 First IC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Street and First IC.

Diversification Opportunities for Main Street and First IC

-0.03

Correlation Coefficient

Main Street  First IC

Good diversification

The 3 months correlation between Main and First is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Financial and First IC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First IC 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 Financial are associated (or correlated) with First IC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First IC has no effect on the direction of Main Street i.e., Main Street and First IC go up and down completely randomly.

Pair Corralation between Main Street and First IC

Given the investment horizon of 90 days Main Street is expected to generate 1.78 times less return on investment than First IC. But when comparing it to its historical volatility, Main Street Financial is 1.16 times less risky than First IC. It trades about 0.07 of its potential returns per unit of risk. First IC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,905  in First IC on May 16, 2025 and sell it today you would earn a total of  180.00  from holding First IC or generate 9.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Main Street Financial  vs.  First IC

Main Street Financial

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Main Street is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

First IC

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in First IC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical and fundamental indicators, First IC may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Main Street and First IC

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

The idea behind Main Street Financial and First IC 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.