Correlation Between New Mountain and Prospect Capital
Can any of the company-specific risk be diversified away by investing in both New Mountain and Prospect 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 Prospect 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 Prospect Capital, you can compare the effects of market volatilities on New Mountain and Prospect 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 Prospect Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Mountain and Prospect Capital.
Diversification Opportunities for New Mountain and Prospect Capital
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between New and Prospect is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding New Mountain Finance and Prospect Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospect 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 Prospect Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospect Capital has no effect on the direction of New Mountain i.e., New Mountain and Prospect Capital go up and down completely randomly.
Pair Corralation between New Mountain and Prospect Capital
Given the investment horizon of 90 days New Mountain Finance is expected to generate 0.39 times more return on investment than Prospect Capital. However, New Mountain Finance is 2.56 times less risky than Prospect Capital. It trades about 0.1 of its potential returns per unit of risk. Prospect Capital is currently generating about -0.1 per unit of risk. If you would invest 1,144 in New Mountain Finance on August 27, 2024 and sell it today you would earn a total of 32.00 from holding New Mountain Finance or generate 2.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Mountain Finance vs. Prospect Capital
Performance |
| Timeline |
| New Mountain Finance |
| Prospect Capital |
New Mountain and Prospect Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Mountain and Prospect Capital
The main advantage of trading using opposite New Mountain and Prospect Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Mountain position performs unexpectedly, Prospect 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 Prospect Capital will offset losses from the drop in Prospect Capital's long position.| New Mountain vs. PowerUp Acquisition Corp | New Mountain vs. Aurora Innovation | New Mountain vs. HUMANA INC | New Mountain vs. Aquagold International |
| Prospect Capital vs. Gladstone Capital | Prospect Capital vs. Horizon Technology Finance | Prospect Capital vs. Gladstone Investment | Prospect Capital vs. Stellus Capital 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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