Correlation Between Oxford Square and Small Cap
Can any of the company-specific risk be diversified away by investing in both Oxford Square and Small Cap 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 Square and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oxford Square Capital and Small Cap Premium, you can compare the effects of market volatilities on Oxford Square and Small Cap 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 Square with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oxford Square and Small Cap.
Diversification Opportunities for Oxford Square and Small Cap
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Oxford and Small is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Oxford Square Capital and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium and Oxford Square 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 Square Capital are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Premium has no effect on the direction of Oxford Square i.e., Oxford Square and Small Cap go up and down completely randomly.
Pair Corralation between Oxford Square and Small Cap
Assuming the 90 days horizon Oxford Square Capital is expected to generate 0.43 times more return on investment than Small Cap. However, Oxford Square Capital is 2.33 times less risky than Small Cap. It trades about 0.24 of its potential returns per unit of risk. Small Cap Premium is currently generating about 0.04 per unit of risk. If you would invest 2,440 in Oxford Square Capital on August 29, 2024 and sell it today you would earn a total of 35.00 from holding Oxford Square Capital or generate 1.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oxford Square Capital vs. Small Cap Premium
Performance |
| Timeline |
| Oxford Square Capital |
| Small Cap Premium |
Oxford Square and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oxford Square and Small Cap
The main advantage of trading using opposite Oxford Square and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oxford Square position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.The idea behind Oxford Square Capital and Small Cap Premium 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.| Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. First Trust Enhanced | Small Cap vs. Voya Global Advantage |
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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