Correlation Between Small Cap and Oxford Lane

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

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

Diversification Opportunities for Small Cap and Oxford Lane

-0.53

Correlation Coefficient

Small Cap  Oxford Lane

Excellent diversification

The 3 months correlation between Small and Oxford is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Oxford Lane Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oxford Lane Capital and Small Cap 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 Small Cap Core are associated (or correlated) with Oxford Lane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oxford Lane Capital has no effect on the direction of Small Cap i.e., Small Cap and Oxford Lane go up and down completely randomly.

Pair Corralation between Small Cap and Oxford Lane

Assuming the 90 days horizon Small Cap Core is expected to under-perform the Oxford Lane. In addition to that, Small Cap is 6.4 times more volatile than Oxford Lane Capital. It trades about -0.03 of its total potential returns per unit of risk. Oxford Lane Capital is currently generating about 0.17 per unit of volatility. If you would invest  2,275  in Oxford Lane Capital on October 22, 2024 and sell it today you would earn a total of  130.00  from holding Oxford Lane Capital or generate 5.71% return on investment over 90 days.

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

Small Cap Core  vs.  Oxford Lane Capital

Small Cap Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Oxford Lane Capital

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oxford Lane Capital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Oxford Lane 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 Small Cap and Oxford Lane

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

The idea behind Small Cap Core and Oxford Lane 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.