Correlation Between Atlas Corp and Prospect Capital

Can any of the company-specific risk be diversified away by investing in both Atlas Corp 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 Atlas Corp and Prospect Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Atlas Corp and Prospect Capital, you can compare the effects of market volatilities on Atlas Corp 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 Atlas Corp with a short position of Prospect Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Corp and Prospect Capital.

Diversification Opportunities for Atlas Corp and Prospect Capital

0.28

Correlation Coefficient

Atlas Corp  Prospect Capital

Modest diversification

The 3 months correlation between Atlas and Prospect is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Corp and Prospect Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospect Capital and Atlas Corp 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 Atlas Corp 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 Atlas Corp i.e., Atlas Corp and Prospect Capital go up and down completely randomly.

Pair Corralation between Atlas Corp and Prospect Capital

Assuming the 90 days trading horizon Atlas Corp is expected to generate 2.98 times less return on investment than Prospect Capital. But when comparing it to its historical volatility, Atlas Corp is 4.72 times less risky than Prospect Capital. It trades about 0.12 of its potential returns per unit of risk. Prospect Capital is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,784  in Prospect Capital on August 30, 2024 and sell it today you would earn a total of  146.00  from holding Prospect Capital or generate 8.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Atlas Corp  vs.  Prospect Capital

Atlas Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Atlas Corp is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Prospect Capital

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prospect Capital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Prospect Capital may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Atlas Corp and Prospect Capital

The main advantage of trading using opposite Atlas Corp and Prospect Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas Corp 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.

The idea behind Atlas Corp and Prospect Capital pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.