Correlation Between Prospect Capital and NexPoint Strategic
Can any of the company-specific risk be diversified away by investing in both Prospect Capital and NexPoint Strategic 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 Prospect Capital and NexPoint Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prospect Capital and NexPoint Strategic Opportunities, you can compare the effects of market volatilities on Prospect Capital and NexPoint Strategic 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 Prospect Capital with a short position of NexPoint Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prospect Capital and NexPoint Strategic.
Diversification Opportunities for Prospect Capital and NexPoint Strategic
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Prospect and NexPoint is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Prospect Capital and NexPoint Strategic Opportuniti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexPoint Strategic and Prospect Capital 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 Prospect Capital are associated (or correlated) with NexPoint Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexPoint Strategic has no effect on the direction of Prospect Capital i.e., Prospect Capital and NexPoint Strategic go up and down completely randomly.
Pair Corralation between Prospect Capital and NexPoint Strategic
Assuming the 90 days trading horizon Prospect Capital is expected to generate 0.76 times more return on investment than NexPoint Strategic. However, Prospect Capital is 1.32 times less risky than NexPoint Strategic. It trades about -0.31 of its potential returns per unit of risk. NexPoint Strategic Opportunities is currently generating about -0.24 per unit of risk. If you would invest 1,758 in Prospect Capital on November 2, 2024 and sell it today you would lose (159.00) from holding Prospect Capital or give up 9.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prospect Capital vs. NexPoint Strategic Opportuniti
Performance |
| Timeline |
| Prospect Capital |
| NexPoint Strategic |
Prospect Capital and NexPoint Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prospect Capital and NexPoint Strategic
The main advantage of trading using opposite Prospect Capital and NexPoint Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prospect Capital position performs unexpectedly, NexPoint Strategic 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 NexPoint Strategic will offset losses from the drop in NexPoint Strategic's long position.| Prospect Capital vs. PennyMac Mortgage Investment | Prospect Capital vs. SiriusPoint | Prospect Capital vs. Telephone and Data | Prospect Capital vs. ARMOUR Residential REIT |
| NexPoint Strategic vs. Modiv Inc | NexPoint Strategic vs. Gladstone Commercial Corp | NexPoint Strategic vs. CTO Realty Growth | NexPoint Strategic vs. Broadstone Net Lease |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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