Correlation Between Great Elm and OFS Credit

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

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

Diversification Opportunities for Great Elm and OFS Credit

0.54

Correlation Coefficient

Great Elm  OFS Credit

Very weak diversification

The 3 months correlation between Great and OFS is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital and OFS Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFS Credit and Great Elm 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 Great Elm Capital are associated (or correlated) with OFS Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFS Credit has no effect on the direction of Great Elm i.e., Great Elm and OFS Credit go up and down completely randomly.

Pair Corralation between Great Elm and OFS Credit

Assuming the 90 days horizon Great Elm Capital is expected to generate 1.57 times more return on investment than OFS Credit. However, Great Elm is 1.57 times more volatile than OFS Credit. It trades about 0.09 of its potential returns per unit of risk. OFS Credit is currently generating about 0.07 per unit of risk. If you would invest  2,438  in Great Elm Capital on December 28, 2024 and sell it today you would earn a total of  62.00  from holding Great Elm Capital or generate 2.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Great Elm Capital  vs.  OFS Credit

Great Elm Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Capital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Great Elm is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

OFS Credit

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OFS Credit are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, OFS Credit is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Great Elm and OFS Credit

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

The idea behind Great Elm Capital and OFS Credit 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.