Correlation Between Ares Capital and XAI Octagon
Can any of the company-specific risk be diversified away by investing in both Ares Capital and XAI Octagon 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 Ares Capital and XAI Octagon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Capital and XAI Octagon Floating, you can compare the effects of market volatilities on Ares Capital and XAI Octagon 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 Ares Capital with a short position of XAI Octagon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Capital and XAI Octagon.
Diversification Opportunities for Ares Capital and XAI Octagon
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ares and XAI is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Ares Capital and XAI Octagon Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAI Octagon Floating and Ares 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 Ares Capital are associated (or correlated) with XAI Octagon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAI Octagon Floating has no effect on the direction of Ares Capital i.e., Ares Capital and XAI Octagon go up and down completely randomly.
Pair Corralation between Ares Capital and XAI Octagon
Given the investment horizon of 90 days Ares Capital is expected to generate 1.41 times less return on investment than XAI Octagon. In addition to that, Ares Capital is 2.0 times more volatile than XAI Octagon Floating. It trades about 0.11 of its total potential returns per unit of risk. XAI Octagon Floating is currently generating about 0.31 per unit of volatility. If you would invest 680.00 in XAI Octagon Floating on August 27, 2024 and sell it today you would earn a total of 16.00 from holding XAI Octagon Floating or generate 2.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Capital vs. XAI Octagon Floating
Performance |
| Timeline |
| Ares Capital |
| XAI Octagon Floating |
Ares Capital and XAI Octagon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Capital and XAI Octagon
The main advantage of trading using opposite Ares Capital and XAI Octagon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Capital position performs unexpectedly, XAI Octagon 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 XAI Octagon will offset losses from the drop in XAI Octagon's long position.| Ares Capital vs. Triplepoint Venture Growth | Ares Capital vs. Sixth Street Specialty | Ares Capital vs. Main Street Capital | Ares Capital vs. Capital Southwest |
| XAI Octagon vs. Oxford Lane Capital | XAI Octagon vs. Capital Southwest | XAI Octagon vs. Cornerstone Strategic Return | XAI Octagon vs. Cornerstone Strategic Value |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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