Correlation Between BlackRock and Monroe Capital

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

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

Diversification Opportunities for BlackRock and Monroe Capital

0.27

Correlation Coefficient

BlackRock  Monroe Capital

Modest diversification

The 3 months correlation between BlackRock and Monroe is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock 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 BlackRock 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 BlackRock 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 BlackRock i.e., BlackRock and Monroe Capital go up and down completely randomly.

Pair Corralation between BlackRock and Monroe Capital

Considering the 90-day investment horizon BlackRock is expected to generate 1.31 times more return on investment than Monroe Capital. However, BlackRock is 1.31 times more volatile than Monroe Capital Corp. It trades about -0.04 of its potential returns per unit of risk. Monroe Capital Corp is currently generating about -0.06 per unit of risk. If you would invest  102,185  in BlackRock on December 29, 2024 and sell it today you would lose (5,391) from holding BlackRock or give up 5.28% of portfolio value over 90 days.

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

BlackRock  vs.  Monroe Capital Corp

BlackRock

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, BlackRock is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional 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 BlackRock and Monroe Capital

The main advantage of trading using opposite BlackRock and Monroe Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock 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 BlackRock 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.