Correlation Between Portman Ridge and Great Elm

Can any of the company-specific risk be diversified away by investing in both Portman Ridge and Great Elm 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 Portman Ridge and Great Elm into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Portman Ridge and Great Elm

-0.24

Correlation Coefficient

Portman Ridge  Great Elm

Very good diversification

The 3 months correlation between Portman and Great is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Portman Ridge Finance and Great Elm Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Elm Capital and Portman Ridge 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 Portman Ridge Finance are associated (or correlated) with Great Elm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Elm Capital has no effect on the direction of Portman Ridge i.e., Portman Ridge and Great Elm go up and down completely randomly.

Pair Corralation between Portman Ridge and Great Elm

Given the investment horizon of 90 days Portman Ridge Finance is expected to under-perform the Great Elm. But the stock apears to be less risky and, when comparing its historical volatility, Portman Ridge Finance is 1.58 times less risky than Great Elm. The stock trades about -0.06 of its potential returns per unit of risk. The Great Elm Capital is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,018  in Great Elm Capital on September 3, 2024 and sell it today you would earn a total of  10.00  from holding Great Elm Capital or generate 0.98% return on investment over 90 days.

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

Portman Ridge Finance  vs.  Great Elm Capital

Portman Ridge Finance

Risk-Adjusted Performance

0 of 100

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 very healthy primary indicators, Portman Ridge is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Great Elm Capital

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Portman Ridge and Great Elm

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

The idea behind Portman Ridge Finance and Great Elm 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.