Correlation Between New Mountain and Carlyle Secured

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

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

Diversification Opportunities for New Mountain and Carlyle Secured

0.67

Correlation Coefficient

New Mountain  Carlyle Secured

Poor diversification

The 3 months correlation between New and Carlyle is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding New Mountain Finance 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 New Mountain 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 New Mountain Finance 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 New Mountain i.e., New Mountain and Carlyle Secured go up and down completely randomly.

Pair Corralation between New Mountain and Carlyle Secured

Given the investment horizon of 90 days New Mountain is expected to generate 7.86 times less return on investment than Carlyle Secured. But when comparing it to its historical volatility, New Mountain Finance is 1.33 times less risky than Carlyle Secured. It trades about 0.05 of its potential returns per unit of risk. Carlyle Secured Lending is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,630  in Carlyle Secured Lending on February 5, 2024 and sell it today you would earn a total of  88.00  from holding Carlyle Secured Lending or generate 5.4% return on investment over 90 days.

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

New Mountain Finance  vs.  Carlyle Secured Lending

New Mountain Finance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Mountain Finance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, New Mountain is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 weak fundamental drivers, Carlyle Secured exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Mountain and Carlyle Secured

The main advantage of trading using opposite New Mountain and Carlyle Secured positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Mountain 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 New Mountain Finance 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.