Correlation Between Capital Southwest and Cipher Mining

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

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

Diversification Opportunities for Capital Southwest and Cipher Mining

0.92

Correlation Coefficient

Capital Southwest  Cipher Mining

Almost no diversification

The 3 months correlation between Capital and Cipher is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Capital Southwest and Cipher Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cipher Mining and Capital Southwest 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 Capital Southwest are associated (or correlated) with Cipher Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cipher Mining has no effect on the direction of Capital Southwest i.e., Capital Southwest and Cipher Mining go up and down completely randomly.

Pair Corralation between Capital Southwest and Cipher Mining

Given the investment horizon of 90 days Capital Southwest is expected to generate 7.82 times less return on investment than Cipher Mining. But when comparing it to its historical volatility, Capital Southwest is 9.96 times less risky than Cipher Mining. It trades about 0.28 of its potential returns per unit of risk. Cipher Mining is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Cipher Mining on April 23, 2025 and sell it today you would earn a total of  93.00  from holding Cipher Mining or generate 221.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Capital Southwest  vs.  Cipher Mining

Capital Southwest

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Southwest are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Capital Southwest exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cipher Mining

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cipher Mining are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Cipher Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital Southwest and Cipher Mining

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

The idea behind Capital Southwest and Cipher Mining 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.