Correlation Between Horizon Technology and Monroe Capital

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

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

Diversification Opportunities for Horizon Technology and Monroe Capital

-0.56

Correlation Coefficient

Horizon Technology  Monroe Capital

Excellent diversification

The 3 months correlation between Horizon and Monroe is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Technology Finance 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 Horizon Technology 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 Horizon Technology Finance 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 Horizon Technology i.e., Horizon Technology and Monroe Capital go up and down completely randomly.

Pair Corralation between Horizon Technology and Monroe Capital

Given the investment horizon of 90 days Horizon Technology Finance is expected to under-perform the Monroe Capital. But the stock apears to be less risky and, when comparing its historical volatility, Horizon Technology Finance is 1.35 times less risky than Monroe Capital. The stock trades about -0.19 of its potential returns per unit of risk. The Monroe Capital Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  778.00  in Monroe Capital Corp on September 12, 2024 and sell it today you would earn a total of  86.00  from holding Monroe Capital Corp or generate 11.05% return on investment over 90 days.

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

Horizon Technology Finance  vs.  Monroe Capital Corp

Horizon Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Horizon Technology Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Monroe Capital Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monroe Capital Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Monroe Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Horizon Technology and Monroe Capital

The main advantage of trading using opposite Horizon Technology and Monroe Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Horizon Technology 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 Horizon Technology Finance 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.