Correlation Between Prospect Capital and OFS Capital
Can any of the company-specific risk be diversified away by investing in both Prospect Capital and OFS 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 Prospect Capital and OFS Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prospect Capital and OFS Capital Corp, you can compare the effects of market volatilities on Prospect Capital and OFS 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 Prospect Capital with a short position of OFS Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prospect Capital and OFS Capital.
Diversification Opportunities for Prospect Capital and OFS Capital
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Prospect and OFS is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Prospect Capital and OFS Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFS Capital Corp and Prospect 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 Prospect Capital are associated (or correlated) with OFS Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFS Capital Corp has no effect on the direction of Prospect Capital i.e., Prospect Capital and OFS Capital go up and down completely randomly.
Pair Corralation between Prospect Capital and OFS Capital
Given the investment horizon of 90 days Prospect Capital is expected to under-perform the OFS Capital. But the stock apears to be less risky and, when comparing its historical volatility, Prospect Capital is 1.03 times less risky than OFS Capital. The stock trades about -0.01 of its potential returns per unit of risk. The OFS Capital Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 780.00 in OFS Capital Corp on August 27, 2024 and sell it today you would earn a total of 35.00 from holding OFS Capital Corp or generate 4.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prospect Capital vs. OFS Capital Corp
Performance |
| Timeline |
| Prospect Capital |
| OFS Capital Corp |
Prospect Capital and OFS Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prospect Capital and OFS Capital
The main advantage of trading using opposite Prospect Capital and OFS Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prospect Capital position performs unexpectedly, OFS 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 OFS Capital will offset losses from the drop in OFS Capital's long position.| Prospect Capital vs. Gladstone Capital | Prospect Capital vs. Horizon Technology Finance | Prospect Capital vs. Gladstone Investment | Prospect Capital vs. Stellus Capital Investment |
| OFS Capital vs. Stellus Capital Investment | OFS Capital vs. Fidus Investment Corp | OFS Capital vs. Monroe Capital Corp | OFS Capital vs. New Mountain Finance |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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