Correlation Between Capital Southwest and BlackRock TCP

Can any of the company-specific risk be diversified away by investing in both Capital Southwest and BlackRock TCP 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 Capital Southwest and BlackRock TCP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capital Southwest and BlackRock TCP Capital, you can compare the effects of market volatilities on Capital Southwest and BlackRock TCP 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 Capital Southwest with a short position of BlackRock TCP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Southwest and BlackRock TCP.

Diversification Opportunities for Capital Southwest and BlackRock TCP

-0.65

Correlation Coefficient

Capital Southwest  BlackRock TCP

Excellent diversification

The 3 months correlation between Capital and BlackRock is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Capital Southwest and BlackRock TCP Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock TCP Capital and Capital Southwest 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 Capital Southwest are associated (or correlated) with BlackRock TCP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock TCP Capital has no effect on the direction of Capital Southwest i.e., Capital Southwest and BlackRock TCP go up and down completely randomly.

Pair Corralation between Capital Southwest and BlackRock TCP

Given the investment horizon of 90 days Capital Southwest is expected to generate 0.86 times more return on investment than BlackRock TCP. However, Capital Southwest is 1.16 times less risky than BlackRock TCP. It trades about 0.07 of its potential returns per unit of risk. BlackRock TCP Capital is currently generating about -0.02 per unit of risk. If you would invest  1,495  in Capital Southwest on October 3, 2024 and sell it today you would earn a total of  687.00  from holding Capital Southwest or generate 45.95% return on investment over 90 days.

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

Capital Southwest  vs.  BlackRock TCP Capital

Capital Southwest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Southwest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

BlackRock TCP Capital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock TCP Capital are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, BlackRock TCP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Capital Southwest and BlackRock TCP

The main advantage of trading using opposite Capital Southwest and BlackRock TCP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Southwest position performs unexpectedly, BlackRock TCP 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 BlackRock TCP will offset losses from the drop in BlackRock TCP's long position.

The idea behind Capital Southwest and BlackRock TCP 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.