Correlation Between New Mountain and Golub Capital

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

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

Diversification Opportunities for New Mountain and Golub Capital

0.77

Correlation Coefficient

New Mountain  Golub Capital

Poor diversification

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

Pair Corralation between New Mountain and Golub Capital

Given the investment horizon of 90 days New Mountain is expected to generate 2.82 times less return on investment than Golub Capital. In addition to that, New Mountain is 1.04 times more volatile than Golub Capital BDC. It trades about 0.02 of its total potential returns per unit of risk. Golub Capital BDC is currently generating about 0.07 per unit of volatility. If you would invest  1,520  in Golub Capital BDC on December 1, 2024 and sell it today you would earn a total of  47.00  from holding Golub Capital BDC or generate 3.09% return on investment over 90 days.

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

New Mountain Finance  vs.  Golub Capital BDC

New Mountain Finance

Risk-Adjusted Performance

Weak

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

Golub Capital BDC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Golub Capital BDC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Golub Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with New Mountain and Golub Capital

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

The idea behind New Mountain Finance and Golub Capital BDC 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.