Correlation Between Capital Southwest and Triplepoint Venture

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

By analyzing existing cross correlation between Capital Southwest and Triplepoint Venture Growth, you can compare the effects of market volatilities on Capital Southwest and Triplepoint Venture 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 Triplepoint Venture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Southwest and Triplepoint Venture.

Diversification Opportunities for Capital Southwest and Triplepoint Venture

-0.56

Correlation Coefficient

Capital Southwest  Triplepoint Venture

Excellent diversification

The 3 months correlation between Capital and Triplepoint is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Capital Southwest and Triplepoint Venture Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triplepoint Venture 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 Triplepoint Venture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triplepoint Venture has no effect on the direction of Capital Southwest i.e., Capital Southwest and Triplepoint Venture go up and down completely randomly.

Pair Corralation between Capital Southwest and Triplepoint Venture

Given the investment horizon of 90 days Capital Southwest is expected to generate 0.65 times more return on investment than Triplepoint Venture. However, Capital Southwest is 1.54 times less risky than Triplepoint Venture. It trades about 0.09 of its potential returns per unit of risk. Triplepoint Venture Growth is currently generating about 0.0 per unit of risk. If you would invest  1,532  in Capital Southwest on February 4, 2024 and sell it today you would earn a total of  1,085  from holding Capital Southwest or generate 70.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Capital Southwest  vs.  Triplepoint Venture Growth

Capital Southwest

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Southwest are ranked lower than 11 (%) 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 June 2024.

Triplepoint Venture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Triplepoint Venture Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Capital Southwest and Triplepoint Venture

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

The idea behind Capital Southwest and Triplepoint Venture Growth 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.