Correlation Between BlackRock TCP and Saratoga Investment

Can any of the company-specific risk be diversified away by investing in both BlackRock TCP and Saratoga Investment 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 Saratoga Investment 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 Saratoga Investment Corp, you can compare the effects of market volatilities on BlackRock TCP and Saratoga Investment 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 Saratoga Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock TCP and Saratoga Investment.

Diversification Opportunities for BlackRock TCP and Saratoga Investment

0.25

Correlation Coefficient

BlackRock TCP  Saratoga Investment

Modest diversification

The 3 months correlation between BlackRock and Saratoga is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock TCP Capital and Saratoga Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saratoga Investment Corp 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 Saratoga Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saratoga Investment Corp has no effect on the direction of BlackRock TCP i.e., BlackRock TCP and Saratoga Investment go up and down completely randomly.

Pair Corralation between BlackRock TCP and Saratoga Investment

Given the investment horizon of 90 days BlackRock TCP Capital is expected to under-perform the Saratoga Investment. In addition to that, BlackRock TCP is 1.76 times more volatile than Saratoga Investment Corp. It trades about -0.03 of its total potential returns per unit of risk. Saratoga Investment Corp is currently generating about 0.14 per unit of volatility. If you would invest  2,315  in Saratoga Investment Corp on December 29, 2024 and sell it today you would earn a total of  205.00  from holding Saratoga Investment Corp or generate 8.86% return on investment over 90 days.

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

BlackRock TCP Capital  vs.  Saratoga Investment Corp

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.

Saratoga Investment Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Saratoga Investment Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Saratoga Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BlackRock TCP and Saratoga Investment

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

The idea behind BlackRock TCP Capital and Saratoga Investment 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.