Correlation Between OFS Capital and Great Elm

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

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

Diversification Opportunities for OFS Capital and Great Elm

0.04

Correlation Coefficient

OFS Capital  Great Elm

Significant diversification

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

Pair Corralation between OFS Capital and Great Elm

Considering the 90-day investment horizon OFS Capital Corp is expected to generate 1.06 times more return on investment than Great Elm. However, OFS Capital is 1.06 times more volatile than Great Elm Capital. It trades about 0.17 of its potential returns per unit of risk. Great Elm Capital is currently generating about 0.02 per unit of risk. If you would invest  767.00  in OFS Capital Corp on December 26, 2024 and sell it today you would earn a total of  135.00  from holding OFS Capital Corp or generate 17.6% return on investment over 90 days.

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

OFS Capital Corp  vs.  Great Elm Capital

OFS Capital Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OFS Capital Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, OFS Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Great Elm Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Great Elm is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with OFS Capital and Great Elm

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

The idea behind OFS Capital Corp and Great Elm 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.