Correlation Between Aquagold International and Cabana Target

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

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

Diversification Opportunities for Aquagold International and Cabana Target

0.6

Correlation Coefficient

Aquagold International  Cabana Target

Poor diversification

The 3 months correlation between Aquagold and Cabana is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Aquagold International 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 Aquagold International 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 Aquagold International 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 Aquagold International i.e., Aquagold International and Cabana Target go up and down completely randomly.

Pair Corralation between Aquagold International and Cabana Target

Given the investment horizon of 90 days Aquagold International is expected to generate 150.32 times more return on investment than Cabana Target. However, Aquagold International is 150.32 times more volatile than Cabana Target Drawdown. It trades about 0.05 of its potential returns per unit of risk. Cabana Target Drawdown is currently generating about 0.05 per unit of risk. If you would invest  17.00  in Aquagold International on October 11, 2024 and sell it today you would lose (16.96) from holding Aquagold International or give up 99.76% of portfolio value over 90 days.

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

Aquagold International  vs.  Cabana Target Drawdown

Aquagold International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquagold International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Cabana Target Drawdown

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabana Target Drawdown has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cabana Target is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aquagold International and Cabana Target

The main advantage of trading using opposite Aquagold International and Cabana Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aquagold International 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 Aquagold International 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.