Correlation Between Prospect Capital and 180 Degree

Can any of the company-specific risk be diversified away by investing in both Prospect Capital and 180 Degree 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 Prospect Capital and 180 Degree into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prospect Capital and 180 Degree Capital, you can compare the effects of market volatilities on Prospect Capital and 180 Degree 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 Prospect Capital with a short position of 180 Degree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prospect Capital and 180 Degree.

Diversification Opportunities for Prospect Capital and 180 Degree

-0.44

Correlation Coefficient

Prospect Capital  180 Degree

Very good diversification

The 3 months correlation between Prospect and 180 is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Prospect Capital and 180 Degree Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 180 Degree Capital and Prospect 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 Prospect Capital are associated (or correlated) with 180 Degree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 180 Degree Capital has no effect on the direction of Prospect Capital i.e., Prospect Capital and 180 Degree go up and down completely randomly.

Pair Corralation between Prospect Capital and 180 Degree

Assuming the 90 days trading horizon Prospect Capital is expected to under-perform the 180 Degree. But the preferred stock apears to be less risky and, when comparing its historical volatility, Prospect Capital is 1.39 times less risky than 180 Degree. The preferred stock trades about -0.21 of its potential returns per unit of risk. The 180 Degree Capital is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  373.00  in 180 Degree Capital on October 9, 2024 and sell it today you would lose (3.00) from holding 180 Degree Capital or give up 0.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Prospect Capital  vs.  180 Degree Capital

Prospect Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prospect Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Prospect Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

180 Degree Capital

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 180 Degree Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, 180 Degree displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prospect Capital and 180 Degree

The main advantage of trading using opposite Prospect Capital and 180 Degree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prospect Capital position performs unexpectedly, 180 Degree 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 180 Degree will offset losses from the drop in 180 Degree's long position.

The idea behind Prospect Capital and 180 Degree Capital 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.