Correlation Between NXG NextGen and Monroe Capital

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

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

Diversification Opportunities for NXG NextGen and Monroe Capital

0.6

Correlation Coefficient

NXG NextGen  Monroe Capital

Poor diversification

The 3 months correlation between NXG and Monroe is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding NXG NextGen Infrastructure and Monroe Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monroe Capital Corp and NXG NextGen 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 NXG NextGen Infrastructure are associated (or correlated) with Monroe Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monroe Capital Corp has no effect on the direction of NXG NextGen i.e., NXG NextGen and Monroe Capital go up and down completely randomly.

Pair Corralation between NXG NextGen and Monroe Capital

Considering the 90-day investment horizon NXG NextGen Infrastructure is expected to under-perform the Monroe Capital. In addition to that, NXG NextGen is 2.17 times more volatile than Monroe Capital Corp. It trades about -0.09 of its total potential returns per unit of risk. Monroe Capital Corp is currently generating about 0.04 per unit of volatility. If you would invest  838.00  in Monroe Capital Corp on October 10, 2024 and sell it today you would earn a total of  7.00  from holding Monroe Capital Corp or generate 0.84% return on investment over 90 days.

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

NXG NextGen Infrastructure  vs.  Monroe Capital Corp

NXG NextGen Infrastr

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NXG NextGen Infrastructure are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, NXG NextGen may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Monroe Capital Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monroe Capital Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Monroe Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NXG NextGen and Monroe Capital

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

The idea behind NXG NextGen Infrastructure and Monroe Capital Corp 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.