Correlation Between American Express and Monroe Capital

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

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

Diversification Opportunities for American Express and Monroe Capital

0.7

Correlation Coefficient

American Express  Monroe Capital

Poor diversification

The 3 months correlation between American and Monroe is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Monroe Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monroe Capital Corp and American Express 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 American Express are associated (or correlated) with Monroe Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monroe Capital Corp has no effect on the direction of American Express i.e., American Express and Monroe Capital go up and down completely randomly.

Pair Corralation between American Express and Monroe Capital

Considering the 90-day investment horizon American Express is expected to under-perform the Monroe Capital. In addition to that, American Express is 1.31 times more volatile than Monroe Capital Corp. It trades about -0.08 of its total potential returns per unit of risk. Monroe Capital Corp is currently generating about -0.06 per unit of volatility. If you would invest  803.00  in Monroe Capital Corp on December 29, 2024 and sell it today you would lose (42.00) from holding Monroe Capital Corp or give up 5.23% of portfolio value over 90 days.

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

American Express  vs.  Monroe Capital Corp

American Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Express has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Monroe Capital Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monroe Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Monroe Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with American Express and Monroe Capital

The main advantage of trading using opposite American Express and Monroe Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Monroe 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 Monroe Capital will offset losses from the drop in Monroe Capital's long position.

The idea behind American Express and Monroe Capital Corp 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.

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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.