Correlation Between Monroe Capital and Logan Ridge

Can any of the company-specific risk be diversified away by investing in both Monroe Capital and Logan Ridge 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 Logan Ridge 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 Logan Ridge Finance, you can compare the effects of market volatilities on Monroe Capital and Logan Ridge 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 Logan Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monroe Capital and Logan Ridge.

Diversification Opportunities for Monroe Capital and Logan Ridge

0.72

Correlation Coefficient

Monroe Capital  Logan Ridge

Poor diversification

The 3 months correlation between Monroe and Logan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Monroe Capital Corp and Logan Ridge Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logan Ridge Finance 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 Logan Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logan Ridge Finance has no effect on the direction of Monroe Capital i.e., Monroe Capital and Logan Ridge go up and down completely randomly.

Pair Corralation between Monroe Capital and Logan Ridge

Given the investment horizon of 90 days Monroe Capital is expected to generate 1.51 times less return on investment than Logan Ridge. But when comparing it to its historical volatility, Monroe Capital Corp is 1.36 times less risky than Logan Ridge. It trades about 0.13 of its potential returns per unit of risk. Logan Ridge Finance is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,121  in Logan Ridge Finance on September 3, 2024 and sell it today you would earn a total of  380.00  from holding Logan Ridge Finance or generate 17.92% return on investment over 90 days.

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

Monroe Capital Corp  vs.  Logan Ridge Finance

Monroe Capital Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monroe Capital Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Monroe Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Logan Ridge Finance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Logan Ridge Finance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Logan Ridge exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monroe Capital and Logan Ridge

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

The idea behind Monroe Capital Corp and Logan Ridge Finance 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.