Correlation Between Oxford Lane and BFC Capital

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

Diversification Opportunities for Oxford Lane and BFC Capital

0.64

Correlation Coefficient

Oxford Lane  BFC Capital

Poor diversification

The 3 months correlation between Oxford and BFC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Oxford Lane Capital and BFC Capital Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BFC Capital Trust 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 BFC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BFC Capital Trust has no effect on the direction of Oxford Lane i.e., Oxford Lane and BFC Capital go up and down completely randomly.

Pair Corralation between Oxford Lane and BFC Capital

Assuming the 90 days horizon Oxford Lane is expected to generate 1.71 times less return on investment than BFC Capital. But when comparing it to its historical volatility, Oxford Lane Capital is 4.24 times less risky than BFC Capital. It trades about 0.16 of its potential returns per unit of risk. BFC Capital Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,521  in BFC Capital Trust on December 28, 2024 and sell it today you would earn a total of  97.00  from holding BFC Capital Trust or generate 3.85% return on investment over 90 days.

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

Oxford Lane Capital  vs.  BFC Capital Trust

Oxford Lane Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oxford Lane Capital are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Oxford Lane is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

BFC Capital Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BFC Capital Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, BFC Capital is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Oxford Lane and BFC Capital

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

The idea behind Oxford Lane Capital and BFC Capital Trust 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.