Correlation Between Golub Capital and Monroe Capital

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

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

Diversification Opportunities for Golub Capital and Monroe Capital

0.82

Correlation Coefficient

Golub Capital  Monroe Capital

Very poor diversification

The 3 months correlation between Golub and Monroe is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Golub Capital BDC 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 Golub 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 Golub Capital BDC 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 Golub Capital i.e., Golub Capital and Monroe Capital go up and down completely randomly.

Pair Corralation between Golub Capital and Monroe Capital

Given the investment horizon of 90 days Golub Capital BDC is expected to generate 0.6 times more return on investment than Monroe Capital. However, Golub Capital BDC is 1.68 times less risky than Monroe Capital. It trades about 0.1 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  1,020  in Golub Capital BDC on December 1, 2024 and sell it today you would earn a total of  547.00  from holding Golub Capital BDC or generate 53.63% return on investment over 90 days.

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

Golub Capital BDC  vs.  Monroe Capital Corp

Golub Capital BDC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Golub Capital BDC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Golub Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Monroe Capital Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monroe Capital Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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 Golub Capital and Monroe Capital

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

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.