Correlation Between Sixth Street and Crescent Capital

Can any of the company-specific risk be diversified away by investing in both Sixth Street and Crescent 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 Sixth Street and Crescent Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sixth Street Specialty and Crescent Capital BDC, you can compare the effects of market volatilities on Sixth Street and Crescent 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 Sixth Street with a short position of Crescent Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sixth Street and Crescent Capital.

Diversification Opportunities for Sixth Street and Crescent Capital

0.21

Correlation Coefficient

Sixth Street  Crescent Capital

Modest diversification

The 3 months correlation between Sixth and Crescent is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sixth Street Specialty and Crescent Capital BDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Capital BDC and Sixth Street 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 Sixth Street Specialty are associated (or correlated) with Crescent Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Capital BDC has no effect on the direction of Sixth Street i.e., Sixth Street and Crescent Capital go up and down completely randomly.

Pair Corralation between Sixth Street and Crescent Capital

Given the investment horizon of 90 days Sixth Street is expected to generate 2.15 times less return on investment than Crescent Capital. But when comparing it to its historical volatility, Sixth Street Specialty is 1.19 times less risky than Crescent Capital. It trades about 0.07 of its potential returns per unit of risk. Crescent Capital BDC is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,782  in Crescent Capital BDC on September 1, 2024 and sell it today you would earn a total of  140.00  from holding Crescent Capital BDC or generate 7.86% return on investment over 90 days.

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

Sixth Street Specialty  vs.  Crescent Capital BDC

Sixth Street Specialty

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sixth Street Specialty are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Sixth Street is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Crescent Capital BDC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Capital BDC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Crescent Capital may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Sixth Street and Crescent Capital

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

The idea behind Sixth Street Specialty and Crescent Capital BDC 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.