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 Income, 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

0.3

Correlation Coefficient

Monroe Capital  MFS High

Weak diversification

The 3 months correlation between Monroe and MFS is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Monroe Capital Corp and MFS High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFS High Income 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 Income 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 Corp is expected to generate 1.58 times more return on investment than MFS High. However, Monroe Capital is 1.58 times more volatile than MFS High Income. It trades about 0.02 of its potential returns per unit of risk. MFS High Income is currently generating about 0.01 per unit of risk. If you would invest  776.00  in Monroe Capital Corp on December 18, 2024 and sell it today you would earn a total of  10.00  from holding Monroe Capital Corp or generate 1.29% 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 Income

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 Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days MFS High Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, MFS High is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Income 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.