Correlation Between Main Street and COSCO SHIPPING

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

Diversification Opportunities for Main Street and COSCO SHIPPING

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Main Street and COSCO is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Capital and COSCO SHIPPING HOLDINGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSCO SHIPPING HOLDINGS 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 COSCO SHIPPING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSCO SHIPPING HOLDINGS has no effect on the direction of Main Street i.e., Main Street and COSCO SHIPPING go up and down completely randomly.

Pair Corralation between Main Street and COSCO SHIPPING

Given the investment horizon of 90 days Main Street Capital is expected to generate 1.31 times more return on investment than COSCO SHIPPING. However, Main Street is 1.31 times more volatile than COSCO SHIPPING HOLDINGS. It trades about -0.39 of its potential returns per unit of risk. COSCO SHIPPING HOLDINGS is currently generating about -0.68 per unit of risk. If you would invest  4,008  in Main Street Capital on July 5, 2022 and sell it today you would lose (644.00)  from holding Main Street Capital or give up 16.07% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy85.0%
ValuesDaily Returns

Main Street Capital  vs.  COSCO SHIPPING HOLDINGS

 Performance (%) 
       Timeline  
Main Street Capital 
Main Street Performance
0 of 100
Over the last 90 days Main Street Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in November 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Main Street Price Channel

COSCO SHIPPING HOLDINGS 
COSCO Performance
0 of 100
Over the last 90 days COSCO SHIPPING HOLDINGS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

COSCO Price Channel

Main Street and COSCO SHIPPING Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Main Street and COSCO SHIPPING

The main advantage of trading using opposite Main Street and COSCO SHIPPING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street position performs unexpectedly, COSCO SHIPPING 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 COSCO SHIPPING will offset losses from the drop in COSCO SHIPPING's long position.
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The idea behind Main Street Capital and COSCO SHIPPING HOLDINGS 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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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 Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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