Correlation Between Highest Performances and Prospect Capital

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

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

Diversification Opportunities for Highest Performances and Prospect Capital

0.67

Correlation Coefficient

Highest Performances  Prospect Capital

Poor diversification

The 3 months correlation between Highest and Prospect is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Highest Performances Holdings and Prospect Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospect Capital and Highest Performances 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 Highest Performances Holdings are associated (or correlated) with Prospect Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospect Capital has no effect on the direction of Highest Performances i.e., Highest Performances and Prospect Capital go up and down completely randomly.

Pair Corralation between Highest Performances and Prospect Capital

Considering the 90-day investment horizon Highest Performances Holdings is expected to under-perform the Prospect Capital. In addition to that, Highest Performances is 6.32 times more volatile than Prospect Capital. It trades about -0.11 of its total potential returns per unit of risk. Prospect Capital is currently generating about -0.07 per unit of volatility. If you would invest  1,707  in Prospect Capital on December 30, 2024 and sell it today you would lose (108.00) from holding Prospect Capital or give up 6.33% of portfolio value over 90 days.

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

Highest Performances Holdings  vs.  Prospect Capital

Highest Performances

Risk-Adjusted Performance

Very Weak

Over the last 90 days Highest Performances Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Prospect Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prospect Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Prospect Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Highest Performances and Prospect Capital

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

The idea behind Highest Performances Holdings and Prospect Capital 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.