Correlation Between Prospect Capital and New Mountain
Can any of the company-specific risk be diversified away by investing in both Prospect Capital and New Mountain 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 New Mountain into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prospect Capital and New Mountain Finance, you can compare the effects of market volatilities on Prospect Capital and New Mountain 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 New Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prospect Capital and New Mountain.
Diversification Opportunities for Prospect Capital and New Mountain
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Prospect and New is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Prospect Capital and New Mountain Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Mountain Finance 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 New Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Mountain Finance has no effect on the direction of Prospect Capital i.e., Prospect Capital and New Mountain go up and down completely randomly.
Pair Corralation between Prospect Capital and New Mountain
Given the investment horizon of 90 days Prospect Capital is expected to under-perform the New Mountain. In addition to that, Prospect Capital is 1.97 times more volatile than New Mountain Finance. It trades about -0.01 of its total potential returns per unit of risk. New Mountain Finance is currently generating about 0.04 per unit of volatility. If you would invest 1,004 in New Mountain Finance on August 27, 2024 and sell it today you would earn a total of 172.00 from holding New Mountain Finance or generate 17.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prospect Capital vs. New Mountain Finance
Performance |
| Timeline |
| Prospect Capital |
| New Mountain Finance |
Prospect Capital and New Mountain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prospect Capital and New Mountain
The main advantage of trading using opposite Prospect Capital and New Mountain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prospect Capital position performs unexpectedly, New Mountain 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 New Mountain will offset losses from the drop in New Mountain's long position.| Prospect Capital vs. Gladstone Capital | Prospect Capital vs. Horizon Technology Finance | Prospect Capital vs. Gladstone Investment | Prospect Capital vs. Stellus Capital Investment |
| New Mountain vs. PowerUp Acquisition Corp | New Mountain vs. Aurora Innovation | New Mountain vs. HUMANA INC | New Mountain vs. Aquagold International |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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