Correlation Between Capital Southwest and SLM Corp

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

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

Diversification Opportunities for Capital Southwest and SLM Corp

0.52

Correlation Coefficient

Capital Southwest  SLM Corp

Very weak diversification

The 3 months correlation between Capital and SLM is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Capital Southwest and SLM Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp has no effect on the direction of Capital Southwest i.e., Capital Southwest and SLM Corp go up and down completely randomly.

Pair Corralation between Capital Southwest and SLM Corp

Given the investment horizon of 90 days Capital Southwest is expected to generate 0.74 times more return on investment than SLM Corp. However, Capital Southwest is 1.35 times less risky than SLM Corp. It trades about 0.23 of its potential returns per unit of risk. SLM Corp is currently generating about 0.12 per unit of risk. If you would invest  1,961  in Capital Southwest on April 30, 2025 and sell it today you would earn a total of  341.00  from holding Capital Southwest or generate 17.39% return on investment over 90 days.

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

Capital Southwest  vs.  SLM Corp

Capital Southwest

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Southwest are ranked lower than 17 (%) 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.

SLM Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SLM Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent essential indicators, SLM Corp may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Capital Southwest and SLM Corp

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

The idea behind Capital Southwest and SLM Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.