Correlation Between OFS Credit and Prospect Capital
Can any of the company-specific risk be diversified away by investing in both OFS Credit and Prospect Capital 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 OFS Credit and Prospect Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between OFS Credit and Prospect Capital, you can compare the effects of market volatilities on OFS Credit and Prospect Capital 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 OFS Credit with a short position of Prospect Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of OFS Credit and Prospect Capital.
Diversification Opportunities for OFS Credit and Prospect Capital
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between OFS and Prospect is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding OFS Credit and Prospect Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospect Capital and OFS Credit 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 OFS Credit are associated (or correlated) with Prospect Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospect Capital has no effect on the direction of OFS Credit i.e., OFS Credit and Prospect Capital go up and down completely randomly.
Pair Corralation between OFS Credit and Prospect Capital
Assuming the 90 days horizon OFS Credit is expected to generate 0.22 times more return on investment than Prospect Capital. However, OFS Credit is 4.6 times less risky than Prospect Capital. It trades about 0.05 of its potential returns per unit of risk. Prospect Capital is currently generating about 0.0 per unit of risk. If you would invest 2,467 in OFS Credit on August 31, 2024 and sell it today you would earn a total of 11.00 from holding OFS Credit or generate 0.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
OFS Credit vs. Prospect Capital
Performance |
| Timeline |
| OFS Credit |
| Prospect Capital |
OFS Credit and Prospect Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with OFS Credit and Prospect Capital
The main advantage of trading using opposite OFS Credit and Prospect Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OFS Credit position performs unexpectedly, Prospect Capital 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 Prospect Capital will offset losses from the drop in Prospect Capital's long position.| OFS Credit vs. The Gabelli Equity | OFS Credit vs. The Gabelli Equity | OFS Credit vs. The Gabelli Utility | OFS Credit vs. Bancroft Fund |
| Prospect Capital vs. PennyMac Mortgage Investment | Prospect Capital vs. SiriusPoint | Prospect Capital vs. Telephone and Data | Prospect Capital vs. ARMOUR Residential REIT |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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