Correlation Between OFS Capital and Stellus Capital

Can any of the company-specific risk be diversified away by investing in both OFS Capital and Stellus 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 OFS Capital and Stellus Capital 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 Stellus Capital Investment, you can compare the effects of market volatilities on OFS Capital and Stellus 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 OFS Capital with a short position of Stellus Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of OFS Capital and Stellus Capital.

Diversification Opportunities for OFS Capital and Stellus Capital

0.03

Correlation Coefficient

OFS Capital  Stellus Capital

Significant diversification

The 3 months correlation between OFS and Stellus is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding OFS Capital Corp and Stellus Capital Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellus Capital Inve 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 Stellus Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellus Capital Inve has no effect on the direction of OFS Capital i.e., OFS Capital and Stellus Capital go up and down completely randomly.

Pair Corralation between OFS Capital and Stellus Capital

Considering the 90-day investment horizon OFS Capital Corp is expected to generate 1.14 times more return on investment than Stellus Capital. However, OFS Capital is 1.14 times more volatile than Stellus Capital Investment. It trades about 0.17 of its potential returns per unit of risk. Stellus Capital Investment is currently generating about 0.11 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  132.00  from holding OFS Capital Corp or generate 17.21% return on investment over 90 days.

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

OFS Capital Corp  vs.  Stellus Capital Investment

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.

Stellus Capital Inve

Risk-Adjusted Performance

OK

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

Pair Trading with OFS Capital and Stellus Capital

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

The idea behind OFS Capital Corp and Stellus Capital Investment 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.