Correlation Between Capital Southwest and Trinity Capital

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

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

Diversification Opportunities for Capital Southwest and Trinity Capital

-0.57

Correlation Coefficient

Capital Southwest  Trinity Capital

Excellent diversification

The 3 months correlation between Capital and Trinity is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Capital Southwest and Trinity Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinity 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 Trinity Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinity Capital has no effect on the direction of Capital Southwest i.e., Capital Southwest and Trinity Capital go up and down completely randomly.

Pair Corralation between Capital Southwest and Trinity Capital

Given the investment horizon of 90 days Capital Southwest is expected to generate 18.73 times less return on investment than Trinity Capital. In addition to that, Capital Southwest is 1.19 times more volatile than Trinity Capital. It trades about 0.0 of its total potential returns per unit of risk. Trinity Capital is currently generating about 0.09 per unit of volatility. If you would invest  1,186  in Trinity Capital on October 19, 2024 and sell it today you would earn a total of  284.00  from holding Trinity Capital or generate 23.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Capital Southwest  vs.  Trinity 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.

Trinity Capital

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trinity Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Trinity Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Capital Southwest and Trinity Capital

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

The idea behind Capital Southwest and Trinity 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 CEOs Directory module to screen CEOs from public companies around the world.