Correlation Between Prospect Capital and Chicago Atlantic

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

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

Diversification Opportunities for Prospect Capital and Chicago Atlantic

0.19

Correlation Coefficient

Prospect Capital  Chicago Atlantic

Average diversification

The 3 months correlation between Prospect and Chicago is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Prospect Capital and Chicago Atlantic BDC, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chicago Atlantic BDC, 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 Chicago Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chicago Atlantic BDC, has no effect on the direction of Prospect Capital i.e., Prospect Capital and Chicago Atlantic go up and down completely randomly.

Pair Corralation between Prospect Capital and Chicago Atlantic

Assuming the 90 days trading horizon Prospect Capital is expected to generate 1.02 times less return on investment than Chicago Atlantic. In addition to that, Prospect Capital is 1.53 times more volatile than Chicago Atlantic BDC,. It trades about 0.03 of its total potential returns per unit of risk. Chicago Atlantic BDC, is currently generating about 0.05 per unit of volatility. If you would invest  1,118  in Chicago Atlantic BDC, on October 1, 2024 and sell it today you would earn a total of  89.00  from holding Chicago Atlantic BDC, or generate 7.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Prospect Capital  vs.  Chicago Atlantic BDC,

Prospect Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prospect Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Chicago Atlantic BDC,

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chicago Atlantic BDC, are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Chicago Atlantic displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prospect Capital and Chicago Atlantic

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

The idea behind Prospect Capital and Chicago Atlantic BDC, 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.