Correlation Between Fidus Investment and Stellus Capital

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

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

Diversification Opportunities for Fidus Investment and Stellus Capital

0.87

Correlation Coefficient

Fidus Investment  Stellus Capital

Very poor diversification

The 3 months correlation between Fidus and Stellus is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Fidus Investment Corp and Stellus Capital Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellus Capital Inve and Fidus Investment 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 Fidus Investment Corp are associated (or correlated) with Stellus Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellus Capital Inve has no effect on the direction of Fidus Investment i.e., Fidus Investment and Stellus Capital go up and down completely randomly.

Pair Corralation between Fidus Investment and Stellus Capital

Given the investment horizon of 90 days Fidus Investment is expected to generate 3.14 times less return on investment than Stellus Capital. But when comparing it to its historical volatility, Fidus Investment Corp is 1.29 times less risky than Stellus Capital. It trades about 0.09 of its potential returns per unit of risk. Stellus Capital Investment is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,263  in Stellus Capital Investment on February 19, 2024 and sell it today you would earn a total of  159.00  from holding Stellus Capital Investment or generate 12.59% return on investment over 90 days.

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

Fidus Investment Corp  vs.  Stellus Capital Investment

Fidus Investment Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidus Investment Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fidus Investment is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Stellus Capital Inve

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellus Capital Investment are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Stellus Capital may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Fidus Investment and Stellus Capital

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

The idea behind Fidus Investment Corp and Stellus Capital Investment 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.