Correlation Between RiverNorth Specialty and Monroe Capital

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

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

Diversification Opportunities for RiverNorth Specialty and Monroe Capital

0.71

Correlation Coefficient

RiverNorth Specialty  Monroe Capital

Poor diversification

The 3 months correlation between RiverNorth and Monroe is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding RiverNorth Specialty 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 RiverNorth Specialty 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 RiverNorth Specialty 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 RiverNorth Specialty i.e., RiverNorth Specialty and Monroe Capital go up and down completely randomly.

Pair Corralation between RiverNorth Specialty and Monroe Capital

Considering the 90-day investment horizon RiverNorth Specialty is expected to generate 3.03 times less return on investment than Monroe Capital. But when comparing it to its historical volatility, RiverNorth Specialty Finance is 3.76 times less risky than Monroe Capital. It trades about 0.17 of its potential returns per unit of risk. 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

RiverNorth Specialty Finance  vs.  Monroe Capital Corp

RiverNorth Specialty

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RiverNorth Specialty Finance are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, RiverNorth Specialty is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 RiverNorth Specialty and Monroe Capital

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

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.