Correlation Between Prospect Capital and Sixth Street
Can any of the company-specific risk be diversified away by investing in both Prospect Capital and Sixth Street 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 Sixth Street into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prospect Capital and Sixth Street Specialty, you can compare the effects of market volatilities on Prospect Capital and Sixth Street 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 Sixth Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prospect Capital and Sixth Street.
Diversification Opportunities for Prospect Capital and Sixth Street
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prospect and Sixth is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Prospect Capital and Sixth Street Specialty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sixth Street Specialty 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 Sixth Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sixth Street Specialty has no effect on the direction of Prospect Capital i.e., Prospect Capital and Sixth Street go up and down completely randomly.
Pair Corralation between Prospect Capital and Sixth Street
Given the investment horizon of 90 days Prospect Capital is expected to under-perform the Sixth Street. In addition to that, Prospect Capital is 1.68 times more volatile than Sixth Street Specialty. It trades about -0.04 of its total potential returns per unit of risk. Sixth Street Specialty is currently generating about 0.07 per unit of volatility. If you would invest 1,465 in Sixth Street Specialty on January 17, 2025 and sell it today you would earn a total of 579.50 from holding Sixth Street Specialty or generate 39.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prospect Capital vs. Sixth Street Specialty
Performance |
| Timeline |
| Prospect Capital |
| Sixth Street Specialty |
Prospect Capital and Sixth Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prospect Capital and Sixth Street
The main advantage of trading using opposite Prospect Capital and Sixth Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prospect Capital position performs unexpectedly, Sixth Street 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 Sixth Street will offset losses from the drop in Sixth Street'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 |
| Sixth Street vs. New Mountain Finance | Sixth Street vs. Carlyle Secured Lending | Sixth Street vs. BlackRock TCP Capital | Sixth Street vs. Fidus Investment Corp |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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