Correlation Between XAI Octagon and Capital Southwest

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

By analyzing existing cross correlation between XAI Octagon Floating and Capital Southwest, you can compare the effects of market volatilities on XAI Octagon and Capital Southwest 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 XAI Octagon with a short position of Capital Southwest. Check out your portfolio center. Please also check ongoing floating volatility patterns of XAI Octagon and Capital Southwest.

Diversification Opportunities for XAI Octagon and Capital Southwest

-0.17

Correlation Coefficient

XAI Octagon  Capital Southwest

Good diversification

The 3 months correlation between XAI and Capital is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding XAI Octagon Floating and Capital Southwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Southwest and XAI Octagon 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 XAI Octagon Floating are associated (or correlated) with Capital Southwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Southwest has no effect on the direction of XAI Octagon i.e., XAI Octagon and Capital Southwest go up and down completely randomly.

Pair Corralation between XAI Octagon and Capital Southwest

Given the investment horizon of 90 days XAI Octagon Floating is expected to under-perform the Capital Southwest. But the stock apears to be less risky and, when comparing its historical volatility, XAI Octagon Floating is 1.29 times less risky than Capital Southwest. The stock trades about -0.15 of its potential returns per unit of risk. The Capital Southwest is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,095  in Capital Southwest on December 27, 2024 and sell it today you would earn a total of  171.00  from holding Capital Southwest or generate 8.16% return on investment over 90 days.

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

XAI Octagon Floating  vs.  Capital Southwest

XAI Octagon Floating

Risk-Adjusted Performance

Very Weak

Over the last 90 days XAI Octagon Floating has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Capital Southwest

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Southwest are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Capital Southwest may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with XAI Octagon and Capital Southwest

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

The idea behind XAI Octagon Floating and Capital Southwest 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.