Correlation Between Great Elm and Fidus Investment

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Can any of the company-specific risk be diversified away by investing in both Great Elm and Fidus Investment 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 Great Elm and Fidus Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Elm Capital and Fidus Investment Corp, you can compare the effects of market volatilities on Great Elm and Fidus Investment 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 Great Elm with a short position of Fidus Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Elm and Fidus Investment.

Diversification Opportunities for Great Elm and Fidus Investment

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Great and Fidus is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital and Fidus Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidus Investment Corp and Great Elm 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 Great Elm Capital are associated (or correlated) with Fidus Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidus Investment Corp has no effect on the direction of Great Elm i.e., Great Elm and Fidus Investment go up and down completely randomly.

Pair Corralation between Great Elm and Fidus Investment

Assuming the 90 days horizon Great Elm is expected to generate 6.4 times less return on investment than Fidus Investment. But when comparing it to its historical volatility, Great Elm Capital is 2.33 times less risky than Fidus Investment. It trades about 0.08 of its potential returns per unit of risk. Fidus Investment Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,951  in Fidus Investment Corp on September 12, 2024 and sell it today you would earn a total of  198.00  from holding Fidus Investment Corp or generate 10.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy89.06%
ValuesDaily Returns

Great Elm Capital  vs.  Fidus Investment Corp

 Performance 
       Timeline  
Great Elm Capital 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Capital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Great Elm is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Fidus Investment Corp 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Fidus Investment Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Fidus Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Great Elm and Fidus Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Great Elm and Fidus Investment

The main advantage of trading using opposite Great Elm and Fidus Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Elm position performs unexpectedly, Fidus Investment 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 Fidus Investment will offset losses from the drop in Fidus Investment's long position.
The idea behind Great Elm Capital and Fidus Investment 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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