Correlation Between Adaptive Alpha and Cabana Target

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

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

Diversification Opportunities for Adaptive Alpha and Cabana Target

0.9

Correlation Coefficient

Adaptive Alpha  Cabana Target

Almost no diversification

The 3 months correlation between Adaptive and Cabana is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Adaptive Alpha Opportunities 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 Adaptive Alpha 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 Adaptive Alpha Opportunities 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 Adaptive Alpha i.e., Adaptive Alpha and Cabana Target go up and down completely randomly.

Pair Corralation between Adaptive Alpha and Cabana Target

Given the investment horizon of 90 days Adaptive Alpha Opportunities is expected to generate 2.05 times more return on investment than Cabana Target. However, Adaptive Alpha is 2.05 times more volatile than Cabana Target Drawdown. It trades about 0.1 of its potential returns per unit of risk. Cabana Target Drawdown is currently generating about 0.16 per unit of risk. If you would invest  2,775  in Adaptive Alpha Opportunities on September 3, 2024 and sell it today you would earn a total of  180.00  from holding Adaptive Alpha Opportunities or generate 6.49% return on investment over 90 days.

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

Adaptive Alpha Opportunities  vs.  Cabana Target Drawdown

Adaptive Alpha Oppor

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adaptive Alpha Opportunities are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Adaptive Alpha may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cabana Target Drawdown

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cabana Target Drawdown are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. 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 Adaptive Alpha and Cabana Target

The main advantage of trading using opposite Adaptive Alpha and Cabana Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adaptive Alpha 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 Adaptive Alpha Opportunities 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.