Correlation Between Golub Capital and New Mountain

Can any of the company-specific risk be diversified away by investing in both Golub Capital and New Mountain 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 New Mountain 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 New Mountain Finance, you can compare the effects of market volatilities on Golub Capital and New Mountain 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 New Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golub Capital and New Mountain.

Diversification Opportunities for Golub Capital and New Mountain

-0.39

Correlation Coefficient

Golub Capital  New Mountain

Very good diversification

The 3 months correlation between Golub and New is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Golub Capital BDC and New Mountain Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Mountain Finance 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 New Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Mountain Finance has no effect on the direction of Golub Capital i.e., Golub Capital and New Mountain go up and down completely randomly.

Pair Corralation between Golub Capital and New Mountain

Given the investment horizon of 90 days Golub Capital BDC is expected to generate 0.9 times more return on investment than New Mountain. However, Golub Capital BDC is 1.11 times less risky than New Mountain. It trades about 0.11 of its potential returns per unit of risk. New Mountain Finance is currently generating about 0.0 per unit of risk. If you would invest  1,485  in Golub Capital BDC on September 3, 2024 and sell it today you would earn a total of  82.00  from holding Golub Capital BDC or generate 5.52% return on investment over 90 days.

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

Golub Capital BDC  vs.  New Mountain Finance

Golub Capital BDC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Golub Capital BDC are ranked lower than 8 (%) 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.

New Mountain Finance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Golub Capital and New Mountain

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

The idea behind Golub Capital BDC and New Mountain Finance 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.