Correlation Between Sixth Street and OFS Capital
Can any of the company-specific risk be diversified away by investing in both Sixth Street 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 Sixth Street and OFS Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sixth Street Specialty and OFS Capital Corp, you can compare the effects of market volatilities on Sixth Street 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 Sixth Street with a short position of OFS Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sixth Street and OFS Capital.
Diversification Opportunities for Sixth Street and OFS Capital
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sixth and OFS is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sixth Street Specialty 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 Sixth Street 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 Sixth Street Specialty 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 Sixth Street i.e., Sixth Street and OFS Capital go up and down completely randomly.
Pair Corralation between Sixth Street and OFS Capital
Given the investment horizon of 90 days Sixth Street Specialty is expected to generate 1.6 times more return on investment than OFS Capital. However, Sixth Street is 1.6 times more volatile than OFS Capital Corp. It trades about 0.09 of its potential returns per unit of risk. OFS Capital Corp is currently generating about -0.03 per unit of risk. If you would invest 2,057 in Sixth Street Specialty on August 28, 2024 and sell it today you would earn a total of 37.00 from holding Sixth Street Specialty or generate 1.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sixth Street Specialty vs. OFS Capital Corp
Performance |
| Timeline |
| Sixth Street Specialty |
| OFS Capital Corp |
Sixth Street and OFS Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sixth Street and OFS Capital
The main advantage of trading using opposite Sixth Street and OFS Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sixth Street 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.| Sixth Street vs. New Mountain Finance | Sixth Street vs. Carlyle Secured Lending | Sixth Street vs. BlackRock TCP Capital | Sixth Street vs. Fidus Investment Corp |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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