Correlation Between High-yield Municipal and Oxford Lane

Can any of the company-specific risk be diversified away by investing in both High-yield Municipal and Oxford Lane 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 High-yield Municipal and Oxford Lane into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between High Yield Municipal Fund and Oxford Lane Capital, you can compare the effects of market volatilities on High-yield Municipal and Oxford Lane 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 High-yield Municipal with a short position of Oxford Lane. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and Oxford Lane.

Diversification Opportunities for High-yield Municipal and Oxford Lane

-0.04

Correlation Coefficient

High-yield Municipal  Oxford Lane

Good diversification

The 3 months correlation between High-yield and Oxford is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Oxford Lane Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oxford Lane Capital and High-yield Municipal 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 High Yield Municipal Fund are associated (or correlated) with Oxford Lane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oxford Lane Capital has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and Oxford Lane go up and down completely randomly.

Pair Corralation between High-yield Municipal and Oxford Lane

Assuming the 90 days horizon High Yield Municipal Fund is expected to under-perform the Oxford Lane. In addition to that, High-yield Municipal is 1.26 times more volatile than Oxford Lane Capital. It trades about -0.04 of its total potential returns per unit of risk. Oxford Lane Capital is currently generating about 0.15 per unit of volatility. If you would invest  2,338  in Oxford Lane Capital on October 24, 2024 and sell it today you would earn a total of  78.00  from holding Oxford Lane Capital or generate 3.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

High Yield Municipal Fund  vs.  Oxford Lane Capital

High Yield Municipal

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Municipal Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, High-yield Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Oxford Lane Capital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oxford Lane Capital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Oxford Lane is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with High-yield Municipal and Oxford Lane

The main advantage of trading using opposite High-yield Municipal and Oxford Lane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High-yield Municipal position performs unexpectedly, Oxford Lane 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 Oxford Lane will offset losses from the drop in Oxford Lane's long position.

The idea behind High Yield Municipal Fund and Oxford Lane Capital 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.