Correlation Between Capital Southwest and Oxford Lane

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

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

Diversification Opportunities for Capital Southwest and Oxford Lane

0.57

Correlation Coefficient

Capital Southwest  Oxford Lane

Very weak diversification

The 3 months correlation between Capital and Oxford is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Capital Southwest and Oxford Lane Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oxford Lane Capital and Capital Southwest 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 Capital Southwest are associated (or correlated) with Oxford Lane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oxford Lane Capital has no effect on the direction of Capital Southwest i.e., Capital Southwest and Oxford Lane go up and down completely randomly.

Pair Corralation between Capital Southwest and Oxford Lane

Given the investment horizon of 90 days Capital Southwest is expected to generate 1.69 times less return on investment than Oxford Lane. In addition to that, Capital Southwest is 1.26 times more volatile than Oxford Lane Capital. It trades about 0.11 of its total potential returns per unit of risk. Oxford Lane Capital is currently generating about 0.24 per unit of volatility. If you would invest  492.00  in Oxford Lane Capital on March 13, 2024 and sell it today you would earn a total of  68.00  from holding Oxford Lane Capital or generate 13.82% return on investment over 90 days.

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

Capital Southwest  vs.  Oxford Lane Capital

Capital Southwest

Risk-Adjusted Performance

8 of 100

OK

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

Oxford Lane Capital

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Oxford Lane Capital are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Oxford Lane exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital Southwest and Oxford Lane

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

The idea behind Capital Southwest and Oxford Lane Capital 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.