Correlation Between Prospect Capital and Cornerstone Strategic

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

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

Diversification Opportunities for Prospect Capital and Cornerstone Strategic

-0.7

Correlation Coefficient

Prospect Capital  Cornerstone Strategic

Excellent diversification

The 3 months correlation between Prospect and Cornerstone is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Prospect Capital and Cornerstone Strategic Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cornerstone Strategic 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 Cornerstone Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cornerstone Strategic has no effect on the direction of Prospect Capital i.e., Prospect Capital and Cornerstone Strategic go up and down completely randomly.

Pair Corralation between Prospect Capital and Cornerstone Strategic

Given the investment horizon of 90 days Prospect Capital is expected to under-perform the Cornerstone Strategic. In addition to that, Prospect Capital is 1.36 times more volatile than Cornerstone Strategic Return. It trades about -0.1 of its total potential returns per unit of risk. Cornerstone Strategic Return is currently generating about 0.12 per unit of volatility. If you would invest  769.00  in Cornerstone Strategic Return on September 26, 2024 and sell it today you would earn a total of  98.00  from holding Cornerstone Strategic Return or generate 12.74% return on investment over 90 days.

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

Prospect Capital  vs.  Cornerstone Strategic Return

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. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cornerstone Strategic

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cornerstone Strategic Return are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly uncertain basic indicators, Cornerstone Strategic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prospect Capital and Cornerstone Strategic

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

The idea behind Prospect Capital and Cornerstone Strategic Return 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.