Correlation Between Oaktree Specialty and Capital One

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

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

Diversification Opportunities for Oaktree Specialty and Capital One

-0.41

Correlation Coefficient

Oaktree Specialty  Capital One

Very good diversification

The 3 months correlation between Oaktree and Capital is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Oaktree Specialty Lending and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial and Oaktree Specialty 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 Oaktree Specialty Lending are associated (or correlated) with Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Oaktree Specialty i.e., Oaktree Specialty and Capital One go up and down completely randomly.

Pair Corralation between Oaktree Specialty and Capital One

Given the investment horizon of 90 days Oaktree Specialty Lending is expected to under-perform the Capital One. But the stock apears to be less risky and, when comparing its historical volatility, Oaktree Specialty Lending is 2.53 times less risky than Capital One. The stock trades about -0.04 of its potential returns per unit of risk. The Capital One Financial is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  14,925  in Capital One Financial on September 30, 2024 and sell it today you would earn a total of  3,097  from holding Capital One Financial or generate 20.75% return on investment over 90 days.

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

Oaktree Specialty Lending  vs.  Capital One Financial

Oaktree Specialty Lending

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oaktree Specialty Lending has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Oaktree Specialty is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Capital One Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Capital One reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oaktree Specialty and Capital One

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

The idea behind Oaktree Specialty Lending and Capital One Financial 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.