Correlation Between Prospect Capital and Atlas Corp

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

By analyzing existing cross correlation between Prospect Capital and Atlas Corp, you can compare the effects of market volatilities on Prospect Capital and Atlas Corp 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 Atlas Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prospect Capital and Atlas Corp.

Diversification Opportunities for Prospect Capital and Atlas Corp

0.26

Correlation Coefficient

Prospect Capital  Atlas Corp

Modest diversification

The 3 months correlation between Prospect and Atlas is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Prospect Capital and Atlas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Corp 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 Atlas Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Corp has no effect on the direction of Prospect Capital i.e., Prospect Capital and Atlas Corp go up and down completely randomly.

Pair Corralation between Prospect Capital and Atlas Corp

Assuming the 90 days trading horizon Prospect Capital is expected to generate 4.53 times more return on investment than Atlas Corp. However, Prospect Capital is 4.53 times more volatile than Atlas Corp. It trades about 0.09 of its potential returns per unit of risk. Atlas Corp is currently generating about 0.13 per unit of risk. If you would invest  1,765  in Prospect Capital on September 2, 2024 and sell it today you would earn a total of  173.00  from holding Prospect Capital or generate 9.8% return on investment over 90 days.

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

Prospect Capital  vs.  Atlas Corp

Prospect Capital

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prospect Capital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Prospect Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Atlas Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Atlas Corp is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Prospect Capital and Atlas Corp

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

The idea behind Prospect Capital and Atlas 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.