Correlation Between Capital Southwest and Sprott Focus

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

By analyzing existing cross correlation between Capital Southwest and Sprott Focus Trust, you can compare the effects of market volatilities on Capital Southwest and Sprott Focus 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 Sprott Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Southwest and Sprott Focus.

Diversification Opportunities for Capital Southwest and Sprott Focus

-0.42

Correlation Coefficient

Capital Southwest  Sprott Focus

Very good diversification

The 3 months correlation between Capital and Sprott is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Capital Southwest and Sprott Focus Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Focus Trust 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 Sprott Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Focus Trust has no effect on the direction of Capital Southwest i.e., Capital Southwest and Sprott Focus go up and down completely randomly.

Pair Corralation between Capital Southwest and Sprott Focus

Given the investment horizon of 90 days Capital Southwest is expected to under-perform the Sprott Focus. In addition to that, Capital Southwest is 1.33 times more volatile than Sprott Focus Trust. It trades about 0.0 of its total potential returns per unit of risk. Sprott Focus Trust is currently generating about 0.05 per unit of volatility. If you would invest  724.00  in Sprott Focus Trust on July 23, 2025 and sell it today you would earn a total of  118.00  from holding Sprott Focus Trust or generate 16.3% return on investment over 90 days.

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

Capital Southwest  vs.  Sprott Focus Trust

Capital Southwest

Risk-Adjusted Performance

Weakest

Over the last 90 days Capital Southwest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Sprott Focus Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Focus Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Sprott Focus may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Pair Trading with Capital Southwest and Sprott Focus

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

The idea behind Capital Southwest and Sprott Focus Trust 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.