Correlation Between Oxford Lane and Western Asset

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

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

Diversification Opportunities for Oxford Lane and Western Asset

0.45

Correlation Coefficient

Oxford Lane  Western Asset

Very weak diversification

The 3 months correlation between Oxford and Western is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Oxford Lane Capital and Western Asset Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Managed and Oxford Lane 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 Oxford Lane Capital are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Managed has no effect on the direction of Oxford Lane i.e., Oxford Lane and Western Asset go up and down completely randomly.

Pair Corralation between Oxford Lane and Western Asset

Given the investment horizon of 90 days Oxford Lane Capital is expected to under-perform the Western Asset. In addition to that, Oxford Lane is 2.5 times more volatile than Western Asset Managed. It trades about -0.04 of its total potential returns per unit of risk. Western Asset Managed is currently generating about 0.12 per unit of volatility. If you would invest  989.00  in Western Asset Managed on December 26, 2024 and sell it today you would earn a total of  43.00  from holding Western Asset Managed or generate 4.35% return on investment over 90 days.

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

Oxford Lane Capital  vs.  Western Asset Managed

Oxford Lane Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oxford Lane Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Oxford Lane is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Western Asset Managed

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Managed are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of comparatively stable primary indicators, Western Asset is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Oxford Lane and Western Asset

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

The idea behind Oxford Lane Capital and Western Asset Managed 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 CEOs Directory module to screen CEOs from public companies around the world.