Correlation Between Oxford Lane and Ares Capital
Can any of the company-specific risk be diversified away by investing in both Oxford Lane and Ares 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 Oxford Lane and Ares Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oxford Lane Capital and Ares Capital, you can compare the effects of market volatilities on Oxford Lane and Ares 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 Oxford Lane with a short position of Ares Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oxford Lane and Ares Capital.
Diversification Opportunities for Oxford Lane and Ares Capital
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Oxford and Ares is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Oxford Lane Capital and Ares Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Capital and Oxford Lane 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 Oxford Lane Capital are associated (or correlated) with Ares Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Capital has no effect on the direction of Oxford Lane i.e., Oxford Lane and Ares Capital go up and down completely randomly.
Pair Corralation between Oxford Lane and Ares Capital
Given the investment horizon of 90 days Oxford Lane is expected to generate 1.24 times less return on investment than Ares Capital. But when comparing it to its historical volatility, Oxford Lane Capital is 1.02 times less risky than Ares Capital. It trades about 0.11 of its potential returns per unit of risk. Ares Capital is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,157 in Ares Capital on August 30, 2024 and sell it today you would earn a total of 44.00 from holding Ares Capital or generate 2.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Oxford Lane Capital vs. Ares Capital
Performance |
| Timeline |
| Oxford Lane Capital |
| Ares Capital |
Oxford Lane and Ares Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oxford Lane and Ares Capital
The main advantage of trading using opposite Oxford Lane and Ares Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oxford Lane position performs unexpectedly, Ares 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 Ares Capital will offset losses from the drop in Ares Capital's long position.| Oxford Lane vs. Capital Southwest | Oxford Lane vs. XAI Octagon Floating | Oxford Lane vs. Cornerstone Strategic Return | Oxford Lane vs. Cornerstone Strategic Value |
| Ares Capital vs. ClimateRock Class A | Ares Capital vs. CF Acquisition VII | Ares Capital vs. DP Cap Acquisition |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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