Correlation Between Prospect Capital and Investor
Can any of the company-specific risk be diversified away by investing in both Prospect Capital and Investor 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 Prospect Capital and Investor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prospect Capital and Investor AB, you can compare the effects of market volatilities on Prospect Capital and Investor 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 Prospect Capital with a short position of Investor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prospect Capital and Investor.
Diversification Opportunities for Prospect Capital and Investor
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Prospect and Investor is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Prospect Capital and Investor AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investor AB and Prospect 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 Prospect Capital are associated (or correlated) with Investor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investor AB has no effect on the direction of Prospect Capital i.e., Prospect Capital and Investor go up and down completely randomly.
Pair Corralation between Prospect Capital and Investor
Given the investment horizon of 90 days Prospect Capital is expected to generate 3.43 times less return on investment than Investor. In addition to that, Prospect Capital is 1.11 times more volatile than Investor AB. It trades about 0.02 of its total potential returns per unit of risk. Investor AB is currently generating about 0.09 per unit of volatility. If you would invest 1,897 in Investor AB on January 20, 2024 and sell it today you would earn a total of 397.00 from holding Investor AB or generate 20.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prospect Capital vs. Investor AB
Performance |
| Timeline |
| Prospect Capital |
| Investor AB |
Prospect Capital and Investor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prospect Capital and Investor
The main advantage of trading using opposite Prospect Capital and Investor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prospect Capital position performs unexpectedly, Investor 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 Investor will offset losses from the drop in Investor's long position.| Prospect Capital vs. Gladstone Capital | Prospect Capital vs. Horizon Technology Finance | Prospect Capital vs. Gladstone Investment | Prospect Capital vs. Stellus Capital 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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