Correlation Between XAI Octagon and Prospect Capital

Can any of the company-specific risk be diversified away by investing in both XAI Octagon and Prospect 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 XAI Octagon and Prospect Capital 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 Prospect Capital, you can compare the effects of market volatilities on XAI Octagon and Prospect 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 XAI Octagon with a short position of Prospect Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of XAI Octagon and Prospect Capital.

Diversification Opportunities for XAI Octagon and Prospect Capital

-0.2

Correlation Coefficient

XAI Octagon  Prospect Capital

Good diversification

The 3 months correlation between XAI and Prospect is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding XAI Octagon Floating and Prospect Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospect Capital 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 Prospect Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospect Capital has no effect on the direction of XAI Octagon i.e., XAI Octagon and Prospect Capital go up and down completely randomly.

Pair Corralation between XAI Octagon and Prospect Capital

Given the investment horizon of 90 days XAI Octagon Floating is expected to generate 0.59 times more return on investment than Prospect Capital. However, XAI Octagon Floating is 1.69 times less risky than Prospect Capital. It trades about 0.07 of its potential returns per unit of risk. Prospect Capital is currently generating about -0.02 per unit of risk. If you would invest  486.00  in XAI Octagon Floating on September 26, 2024 and sell it today you would earn a total of  182.00  from holding XAI Octagon Floating or generate 37.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

XAI Octagon Floating  vs.  Prospect Capital

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.

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 weak 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.

Pair Trading with XAI Octagon and Prospect Capital

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

The idea behind XAI Octagon Floating and Prospect 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.