Correlation Between Monroe Capital and Gladstone Investment

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

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

Diversification Opportunities for Monroe Capital and Gladstone Investment

0.51

Correlation Coefficient

Monroe Capital  Gladstone Investment

Very weak diversification

The 3 months correlation between Monroe and Gladstone is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Monroe Capital Corp and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment and Monroe 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 Monroe Capital Corp are associated (or correlated) with Gladstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Investment has no effect on the direction of Monroe Capital i.e., Monroe Capital and Gladstone Investment go up and down completely randomly.

Pair Corralation between Monroe Capital and Gladstone Investment

Given the investment horizon of 90 days Monroe Capital is expected to generate 1.87 times less return on investment than Gladstone Investment. In addition to that, Monroe Capital is 1.15 times more volatile than Gladstone Investment. It trades about 0.09 of its total potential returns per unit of risk. Gladstone Investment is currently generating about 0.19 per unit of volatility. If you would invest  1,189  in Gladstone Investment on September 12, 2024 and sell it today you would earn a total of  192.00  from holding Gladstone Investment or generate 16.15% return on investment over 90 days.

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

Monroe Capital Corp  vs.  Gladstone Investment

Monroe Capital Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monroe Capital Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Monroe Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gladstone Investment

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Gladstone Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monroe Capital and Gladstone Investment

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

The idea behind Monroe Capital Corp and Gladstone Investment 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.