Correlation Between Newtek Business and Oxford Lane

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

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

Diversification Opportunities for Newtek Business and Oxford Lane

0.9

Correlation Coefficient

Newtek Business  Oxford Lane

Almost no diversification

The 3 months correlation between Newtek and Oxford is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Newtek Business Services 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 Newtek Business 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 Newtek Business Services 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 Newtek Business i.e., Newtek Business and Oxford Lane go up and down completely randomly.

Pair Corralation between Newtek Business and Oxford Lane

Assuming the 90 days horizon Newtek Business Services is expected to under-perform the Oxford Lane. In addition to that, Newtek Business is 104.14 times more volatile than Oxford Lane Capital. It trades about -0.2 of its total potential returns per unit of risk. Oxford Lane Capital is currently generating about 0.19 per unit of volatility. If you would invest  2,259  in Oxford Lane Capital on September 26, 2024 and sell it today you would earn a total of  106.00  from holding Oxford Lane Capital or generate 4.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	19.84%
Values	Daily Returns

Newtek Business Services  vs.  Oxford Lane Capital

Newtek Business Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newtek Business Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Newtek Business is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Oxford Lane Capital

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oxford Lane Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Oxford Lane is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Newtek Business and Oxford Lane

The main advantage of trading using opposite Newtek Business and Oxford Lane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newtek Business 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 Newtek Business Services 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.