Correlation Between Monroe Capital and Carlyle Secured

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

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

Diversification Opportunities for Monroe Capital and Carlyle Secured

0.75

Correlation Coefficient

Monroe Capital  Carlyle Secured

Poor diversification

The 3 months correlation between Monroe and Carlyle is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Monroe Capital Corp and Carlyle Secured Lending in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlyle Secured Lending and Monroe 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 Monroe Capital Corp are associated (or correlated) with Carlyle Secured. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlyle Secured Lending has no effect on the direction of Monroe Capital i.e., Monroe Capital and Carlyle Secured go up and down completely randomly.

Pair Corralation between Monroe Capital and Carlyle Secured

Given the investment horizon of 90 days Monroe Capital is expected to generate 1.97 times less return on investment than Carlyle Secured. But when comparing it to its historical volatility, Monroe Capital Corp is 1.02 times less risky than Carlyle Secured. It trades about 0.11 of its potential returns per unit of risk. Carlyle Secured Lending is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,574  in Carlyle Secured Lending on March 1, 2024 and sell it today you would earn a total of  205.00  from holding Carlyle Secured Lending or generate 13.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Monroe Capital Corp  vs.  Carlyle Secured Lending

Monroe Capital Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monroe Capital Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, Monroe Capital may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Carlyle Secured Lending

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Secured Lending are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental drivers, Carlyle Secured exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monroe Capital and Carlyle Secured

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

The idea behind Monroe Capital Corp and Carlyle Secured Lending 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.