Correlation Between Chicago Atlantic and Prospect Capital

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

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

Diversification Opportunities for Chicago Atlantic and Prospect Capital

0.19

Correlation Coefficient

Chicago Atlantic  Prospect Capital

Average diversification

The 3 months correlation between Chicago and Prospect is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Chicago Atlantic BDC, and Prospect Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospect Capital and Chicago Atlantic 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 Chicago Atlantic BDC, 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 Chicago Atlantic i.e., Chicago Atlantic and Prospect Capital go up and down completely randomly.

Pair Corralation between Chicago Atlantic and Prospect Capital

Given the investment horizon of 90 days Chicago Atlantic BDC, is expected to generate 0.82 times more return on investment than Prospect Capital. However, Chicago Atlantic BDC, is 1.22 times less risky than Prospect Capital. It trades about -0.16 of its potential returns per unit of risk. Prospect Capital is currently generating about -0.4 per unit of risk. If you would invest  1,251  in Chicago Atlantic BDC, on October 1, 2024 and sell it today you would lose (44.00) from holding Chicago Atlantic BDC, or give up 3.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Chicago Atlantic BDC,  vs.  Prospect Capital

Chicago Atlantic BDC,

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chicago Atlantic BDC, are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Chicago Atlantic displayed solid returns over the last few months and may actually be approaching a breakup point.

Prospect Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prospect Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Chicago Atlantic and Prospect Capital

The main advantage of trading using opposite Chicago Atlantic and Prospect Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chicago Atlantic 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 Chicago Atlantic BDC, 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.