Correlation Between Prospect Capital and Royalty Management
Can any of the company-specific risk be diversified away by investing in both Prospect Capital and Royalty Management 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 Royalty Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prospect Capital and Royalty Management Holding, you can compare the effects of market volatilities on Prospect Capital and Royalty Management 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 Royalty Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prospect Capital and Royalty Management.
Diversification Opportunities for Prospect Capital and Royalty Management
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Prospect and Royalty is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Prospect Capital and Royalty Management Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royalty Management 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 Royalty Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royalty Management has no effect on the direction of Prospect Capital i.e., Prospect Capital and Royalty Management go up and down completely randomly.
Pair Corralation between Prospect Capital and Royalty Management
Given the investment horizon of 90 days Prospect Capital is expected to generate 0.5 times more return on investment than Royalty Management. However, Prospect Capital is 1.99 times less risky than Royalty Management. It trades about 0.16 of its potential returns per unit of risk. Royalty Management Holding is currently generating about -0.2 per unit of risk. If you would invest 423.00 in Prospect Capital on September 13, 2024 and sell it today you would earn a total of 24.00 from holding Prospect Capital or generate 5.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prospect Capital vs. Royalty Management Holding
Performance |
| Timeline |
| Prospect Capital |
| Royalty Management |
Prospect Capital and Royalty Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prospect Capital and Royalty Management
The main advantage of trading using opposite Prospect Capital and Royalty Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prospect Capital position performs unexpectedly, Royalty Management 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 Royalty Management will offset losses from the drop in Royalty Management'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 |
| Royalty Management vs. Visa Class A | Royalty Management vs. Diamond Hill Investment | Royalty Management vs. Distoken Acquisition | Royalty Management vs. AllianceBernstein Holding LP |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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