Correlation Between BlackRock TCP and Prospect Capital

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

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

Diversification Opportunities for BlackRock TCP and Prospect Capital

0.21

Correlation Coefficient

BlackRock TCP  Prospect Capital

Modest diversification

The 3 months correlation between BlackRock and Prospect is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock TCP Capital and Prospect Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospect Capital and BlackRock TCP 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 BlackRock TCP Capital are associated (or correlated) with Prospect Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospect Capital has no effect on the direction of BlackRock TCP i.e., BlackRock TCP and Prospect Capital go up and down completely randomly.

Pair Corralation between BlackRock TCP and Prospect Capital

Given the investment horizon of 90 days BlackRock TCP Capital is expected to under-perform the Prospect Capital. In addition to that, BlackRock TCP is 1.86 times more volatile than Prospect Capital. It trades about -0.03 of its total potential returns per unit of risk. Prospect Capital is currently generating about 0.0 per unit of volatility. If you would invest  413.00  in Prospect Capital on December 30, 2024 and sell it today you would lose (1.00) from holding Prospect Capital or give up 0.24% of portfolio value over 90 days.

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

BlackRock TCP Capital  vs.  Prospect Capital

BlackRock TCP Capital

Risk-Adjusted Performance

Very Weak

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

Prospect Capital

Risk-Adjusted Performance

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 rather sound technical and fundamental indicators, Prospect Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BlackRock TCP and Prospect Capital

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

The idea behind BlackRock TCP Capital and Prospect 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.