Correlation Between Monroe Capital and MFS High

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

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

Diversification Opportunities for Monroe Capital and MFS High

0.29

Correlation Coefficient

Monroe Capital  MFS High

Modest diversification

The 3 months correlation between Monroe and MFS is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Monroe Capital Corp and MFS High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS High Yield and Monroe 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 Monroe Capital Corp are associated (or correlated) with MFS High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFS High Yield has no effect on the direction of Monroe Capital i.e., Monroe Capital and MFS High go up and down completely randomly.

Pair Corralation between Monroe Capital and MFS High

Given the investment horizon of 90 days Monroe Capital is expected to generate 1.37 times less return on investment than MFS High. In addition to that, Monroe Capital is 2.46 times more volatile than MFS High Yield. It trades about 0.02 of its total potential returns per unit of risk. MFS High Yield is currently generating about 0.08 per unit of volatility. If you would invest  347.00  in MFS High Yield on December 18, 2024 and sell it today you would earn a total of  8.00  from holding MFS High Yield or generate 2.31% return on investment over 90 days.

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

Monroe Capital Corp  vs.  MFS High Yield

Monroe Capital Corp

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Monroe Capital Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Monroe Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

MFS High Yield

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MFS High Yield are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, MFS High is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Monroe Capital and MFS High

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

The idea behind Monroe Capital Corp and MFS High Yield 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.