Correlation Between Prospect Capital and XAI Octagon

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

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

Diversification Opportunities for Prospect Capital and XAI Octagon

-0.12

Correlation Coefficient

Prospect Capital  XAI Octagon

Good diversification

The 3 months correlation between Prospect and XAI is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Prospect Capital and XAI Octagon Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAI Octagon Floating and Prospect Capital 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 Prospect Capital are associated (or correlated) with XAI Octagon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAI Octagon Floating has no effect on the direction of Prospect Capital i.e., Prospect Capital and XAI Octagon go up and down completely randomly.

Pair Corralation between Prospect Capital and XAI Octagon

Given the investment horizon of 90 days Prospect Capital is expected to under-perform the XAI Octagon. In addition to that, Prospect Capital is 2.53 times more volatile than XAI Octagon Floating. It trades about -0.1 of its total potential returns per unit of risk. XAI Octagon Floating is currently generating about 0.03 per unit of volatility. If you would invest  659.00  in XAI Octagon Floating on September 26, 2024 and sell it today you would earn a total of  9.00  from holding XAI Octagon Floating or generate 1.37% return on investment over 90 days.

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

Prospect Capital  vs.  XAI Octagon Floating

Prospect Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prospect Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

XAI Octagon Floating

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XAI Octagon Floating are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, XAI Octagon is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Prospect Capital and XAI Octagon

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

The idea behind Prospect Capital and XAI Octagon Floating 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.