Correlation Between New Mountain and Monroe Capital

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

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

Diversification Opportunities for New Mountain and Monroe Capital

-0.13

Correlation Coefficient

New Mountain  Monroe Capital

Good diversification

The 3 months correlation between New and Monroe is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding New Mountain Finance 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 New Mountain 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 New Mountain Finance 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 New Mountain i.e., New Mountain and Monroe Capital go up and down completely randomly.

Pair Corralation between New Mountain and Monroe Capital

Given the investment horizon of 90 days New Mountain Finance is expected to under-perform the Monroe Capital. But the stock apears to be less risky and, when comparing its historical volatility, New Mountain Finance is 1.49 times less risky than Monroe Capital. The stock trades about 0.0 of its potential returns per unit of risk. The 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 2, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

New Mountain Finance  vs.  Monroe Capital Corp

New Mountain Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Mountain Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, New Mountain is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 New Mountain and Monroe Capital

The main advantage of trading using opposite New Mountain and Monroe Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Mountain 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 New Mountain Finance 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.