Correlation Between Prospect Capital and WhiteHorse Finance

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

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

Diversification Opportunities for Prospect Capital and WhiteHorse Finance

0.85

Correlation Coefficient

Prospect Capital  WhiteHorse Finance

Very poor diversification

The 3 months correlation between Prospect and WhiteHorse is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Prospect Capital and WhiteHorse Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WhiteHorse Finance 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 WhiteHorse Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WhiteHorse Finance has no effect on the direction of Prospect Capital i.e., Prospect Capital and WhiteHorse Finance go up and down completely randomly.

Pair Corralation between Prospect Capital and WhiteHorse Finance

Given the investment horizon of 90 days Prospect Capital is expected to under-perform the WhiteHorse Finance. In addition to that, Prospect Capital is 1.91 times more volatile than WhiteHorse Finance. It trades about -0.1 of its total potential returns per unit of risk. WhiteHorse Finance is currently generating about -0.04 per unit of volatility. If you would invest  1,111  in WhiteHorse Finance on September 12, 2024 and sell it today you would lose (38.00) from holding WhiteHorse Finance or give up 3.42% of portfolio value over 90 days.

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

Prospect Capital  vs.  WhiteHorse Finance

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. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

WhiteHorse Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WhiteHorse Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, WhiteHorse Finance is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Prospect Capital and WhiteHorse Finance

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

The idea behind Prospect Capital and WhiteHorse 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.