Correlation Between Blue Owl and FS Credit

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

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

Diversification Opportunities for Blue Owl and FS Credit

0.89

Correlation Coefficient

Blue Owl  FS Credit

Very poor diversification

The 3 months correlation between Blue and FSCO is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Blue Owl Capital and FS Credit Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS Credit Opportunities and Blue Owl 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 Blue Owl Capital are associated (or correlated) with FS Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS Credit Opportunities has no effect on the direction of Blue Owl i.e., Blue Owl and FS Credit go up and down completely randomly.

Pair Corralation between Blue Owl and FS Credit

Considering the 90-day investment horizon Blue Owl Capital is expected to generate 2.53 times more return on investment than FS Credit. However, Blue Owl is 2.53 times more volatile than FS Credit Opportunities. It trades about 0.23 of its potential returns per unit of risk. FS Credit Opportunities is currently generating about 0.19 per unit of risk. If you would invest  1,692  in Blue Owl Capital on September 3, 2024 and sell it today you would earn a total of  612.00  from holding Blue Owl Capital or generate 36.17% return on investment over 90 days.

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

Blue Owl Capital  vs.  FS Credit Opportunities

Blue Owl Capital

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Owl Capital are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Blue Owl disclosed solid returns over the last few months and may actually be approaching a breakup point.

FS Credit Opportunities

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FS Credit Opportunities are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, FS Credit may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Blue Owl and FS Credit

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

The idea behind Blue Owl Capital and FS Credit Opportunities 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.