Correlation Between Stellus Capital and WhiteHorse Finance

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

Diversification Opportunities for Stellus Capital and WhiteHorse Finance

0.83

Correlation Coefficient

Stellus Capital  WhiteHorse Finance

Very poor diversification

The 3 months correlation between Stellus and WhiteHorse is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Stellus Capital Investment and WhiteHorse Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WhiteHorse Finance and Stellus 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 Stellus Capital Investment 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 Stellus Capital i.e., Stellus Capital and WhiteHorse Finance go up and down completely randomly.

Pair Corralation between Stellus Capital and WhiteHorse Finance

Considering the 90-day investment horizon Stellus Capital Investment is expected to generate 0.73 times more return on investment than WhiteHorse Finance. However, Stellus Capital Investment is 1.36 times less risky than WhiteHorse Finance. It trades about 0.25 of its potential returns per unit of risk. WhiteHorse Finance is currently generating about 0.16 per unit of risk. If you would invest  1,343  in Stellus Capital Investment on December 2, 2024 and sell it today you would earn a total of  184.00  from holding Stellus Capital Investment or generate 13.7% return on investment over 90 days.

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

Stellus Capital Investment  vs.  WhiteHorse Finance

Stellus Capital Inve

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellus Capital Investment are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Stellus Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

WhiteHorse Finance

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WhiteHorse Finance are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical indicators, WhiteHorse Finance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Stellus Capital and WhiteHorse Finance

The main advantage of trading using opposite Stellus Capital and WhiteHorse Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellus 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 Stellus Capital Investment 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.