Correlation Between Portman Ridge and Monroe Capital

Can any of the company-specific risk be diversified away by investing in both Portman Ridge 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 Portman Ridge and Monroe Capital 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 Monroe Capital Corp, you can compare the effects of market volatilities on Portman Ridge 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 Portman Ridge with a short position of Monroe Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Portman Ridge and Monroe Capital.

Diversification Opportunities for Portman Ridge and Monroe Capital

0.77

Correlation Coefficient

Portman Ridge  Monroe Capital

Poor diversification

The 3 months correlation between Portman and Monroe is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Portman Ridge Finance 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 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 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 Portman Ridge i.e., Portman Ridge and Monroe Capital go up and down completely randomly.

Pair Corralation between Portman Ridge and Monroe Capital

Given the investment horizon of 90 days Portman Ridge Finance is expected to under-perform the Monroe Capital. But the stock apears to be less risky and, when comparing its historical volatility, Portman Ridge Finance is 1.01 times less risky than Monroe Capital. The stock trades about -0.1 of its potential returns per unit of risk. The Monroe Capital Corp is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  803.00  in Monroe Capital Corp on December 29, 2024 and sell it today you would lose (42.00) from holding Monroe Capital Corp or give up 5.23% of portfolio value over 90 days.

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

Portman Ridge Finance  vs.  Monroe Capital Corp

Portman Ridge Finance

Risk-Adjusted Performance

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 latest unsteady performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Monroe Capital Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monroe Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Monroe Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Portman Ridge and Monroe Capital

The main advantage of trading using opposite Portman Ridge and Monroe Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Portman Ridge 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 Portman Ridge Finance 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.