Correlation Between Eaton Vance and Monroe Capital

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

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

Diversification Opportunities for Eaton Vance and Monroe Capital

-0.47

Correlation Coefficient

Eaton Vance  Monroe Capital

Very good diversification

The 3 months correlation between Eaton and Monroe is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance National 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 Eaton Vance 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 Eaton Vance National 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 Eaton Vance i.e., Eaton Vance and Monroe Capital go up and down completely randomly.

Pair Corralation between Eaton Vance and Monroe Capital

Considering the 90-day investment horizon Eaton Vance is expected to generate 19.75 times less return on investment than Monroe Capital. But when comparing it to its historical volatility, Eaton Vance National is 2.92 times less risky than Monroe Capital. It trades about 0.02 of its potential returns per unit of risk. Monroe Capital Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  763.00  in Monroe Capital Corp on September 3, 2024 and sell it today you would earn a total of  89.00  from holding Monroe Capital Corp or generate 11.66% return on investment over 90 days.

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

Eaton Vance National  vs.  Monroe Capital Corp

Eaton Vance National

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance National are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Eaton Vance is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Monroe Capital Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monroe Capital Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Monroe Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eaton Vance and Monroe Capital

The main advantage of trading using opposite Eaton Vance and Monroe Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton Vance 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 Eaton Vance National 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.