Correlation Between New Mountain and Ares Capital
Can any of the company-specific risk be diversified away by investing in both New Mountain and Ares Capital 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 New Mountain and Ares Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Mountain Finance and Ares Capital, you can compare the effects of market volatilities on New Mountain and Ares Capital 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 New Mountain with a short position of Ares Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Mountain and Ares Capital.
Diversification Opportunities for New Mountain and Ares Capital
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between New and Ares is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding New Mountain Finance and Ares Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Capital and New Mountain 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 New Mountain Finance are associated (or correlated) with Ares Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Capital has no effect on the direction of New Mountain i.e., New Mountain and Ares Capital go up and down completely randomly.
Pair Corralation between New Mountain and Ares Capital
Given the investment horizon of 90 days New Mountain Finance is expected to under-perform the Ares Capital. In addition to that, New Mountain is 1.01 times more volatile than Ares Capital. It trades about -0.04 of its total potential returns per unit of risk. Ares Capital is currently generating about 0.07 per unit of volatility. If you would invest 2,037 in Ares Capital on August 24, 2024 and sell it today you would earn a total of 141.00 from holding Ares Capital or generate 6.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Mountain Finance vs. Ares Capital
Performance |
| Timeline |
| New Mountain Finance |
| Ares Capital |
New Mountain and Ares Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Mountain and Ares Capital
The main advantage of trading using opposite New Mountain and Ares Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Mountain position performs unexpectedly, Ares Capital 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 Ares Capital will offset losses from the drop in Ares Capital's long position.| New Mountain vs. BlackRock TCP Capital | New Mountain vs. Carlyle Secured Lending | New Mountain vs. Sixth Street Specialty | New Mountain vs. WhiteHorse Finance |
| Ares Capital vs. Triplepoint Venture Growth | Ares Capital vs. Sixth Street Specialty | Ares Capital vs. Main Street Capital | Ares Capital vs. Capital Southwest |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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