Correlation Between Monroe Capital and Portman Ridge

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

Diversification Opportunities for Monroe Capital and Portman Ridge

0.77

Correlation Coefficient

Monroe Capital  Portman Ridge

Poor diversification

The 3 months correlation between Monroe and Portman is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Monroe Capital Corp and Portman Ridge Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portman 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 Portman Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portman Ridge Finance has no effect on the direction of Monroe Capital i.e., Monroe Capital and Portman Ridge go up and down completely randomly.

Pair Corralation between Monroe Capital and Portman Ridge

Given the investment horizon of 90 days Monroe Capital Corp is expected to generate 1.01 times more return on investment than Portman Ridge. However, Monroe Capital is 1.01 times more volatile than Portman Ridge Finance. It trades about -0.06 of its potential returns per unit of risk. Portman Ridge Finance is currently generating about -0.1 per unit of risk. If you would invest  803.00  in Monroe Capital Corp on December 29, 2024 and sell it today you would lose (42.00) from holding Monroe Capital Corp or give up 5.23% of portfolio value over 90 days.

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

Monroe Capital Corp  vs.  Portman Ridge Finance

Monroe Capital Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monroe Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Portman Ridge Finance

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Monroe Capital and Portman Ridge

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

The idea behind Monroe Capital Corp and Portman 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.