Correlation Between Anfield Equity and Cabana Target

Can any of the company-specific risk be diversified away by investing in both Anfield Equity and Cabana Target 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 Anfield Equity and Cabana Target into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Anfield Equity Sector and Cabana Target Drawdown, you can compare the effects of market volatilities on Anfield Equity and Cabana Target 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 Anfield Equity with a short position of Cabana Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anfield Equity and Cabana Target.

Diversification Opportunities for Anfield Equity and Cabana Target

0.79

Correlation Coefficient

Anfield Equity  Cabana Target

Poor diversification

The 3 months correlation between Anfield and Cabana is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Anfield Equity Sector and Cabana Target Drawdown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabana Target Drawdown and Anfield Equity 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 Anfield Equity Sector are associated (or correlated) with Cabana Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabana Target Drawdown has no effect on the direction of Anfield Equity i.e., Anfield Equity and Cabana Target go up and down completely randomly.

Pair Corralation between Anfield Equity and Cabana Target

Given the investment horizon of 90 days Anfield Equity Sector is expected to under-perform the Cabana Target. In addition to that, Anfield Equity is 1.58 times more volatile than Cabana Target Drawdown. It trades about -0.06 of its total potential returns per unit of risk. Cabana Target Drawdown is currently generating about -0.05 per unit of volatility. If you would invest  2,548  in Cabana Target Drawdown on December 5, 2024 and sell it today you would lose (49.00) from holding Cabana Target Drawdown or give up 1.92% of portfolio value over 90 days.

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

Anfield Equity Sector  vs.  Cabana Target Drawdown

Anfield Equity Sector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Anfield Equity Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Anfield Equity is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Cabana Target Drawdown

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cabana Target Drawdown has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cabana Target is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Anfield Equity and Cabana Target

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

The idea behind Anfield Equity Sector and Cabana Target Drawdown 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.