Correlation Between Cass Saddle and CAFCA

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

By analyzing existing cross correlation between Cass Saddle Agriculture and CAFCA LIMITED, you can compare the effects of market volatilities on Cass Saddle and CAFCA 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 Cass Saddle with a short position of CAFCA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cass Saddle and CAFCA.

Diversification Opportunities for Cass Saddle and CAFCA

0.86

Correlation Coefficient

Cass Saddle  CAFCA

Very poor diversification

The 3 months correlation between Cass and CAFCA is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Cass Saddle Agriculture and CAFCA LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAFCA LIMITED and Cass Saddle 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 Cass Saddle Agriculture are associated (or correlated) with CAFCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAFCA LIMITED has no effect on the direction of Cass Saddle i.e., Cass Saddle and CAFCA go up and down completely randomly.

Pair Corralation between Cass Saddle and CAFCA

Assuming the 90 days trading horizon Cass Saddle Agriculture is expected to generate 1.13 times more return on investment than CAFCA. However, Cass Saddle is 1.13 times more volatile than CAFCA LIMITED. It trades about 0.32 of its potential returns per unit of risk. CAFCA LIMITED is currently generating about 0.19 per unit of risk. If you would invest  46.00  in Cass Saddle Agriculture on October 12, 2024 and sell it today you would earn a total of  454.00  from holding Cass Saddle Agriculture or generate 986.96% return on investment over 90 days.

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

Cass Saddle Agriculture  vs.  CAFCA LIMITED

Cass Saddle Agriculture

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Cass Saddle Agriculture are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Cass Saddle showed solid returns over the last few months and may actually be approaching a breakup point.

CAFCA LIMITED

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CAFCA LIMITED are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, CAFCA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cass Saddle and CAFCA

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

The idea behind Cass Saddle Agriculture and CAFCA LIMITED 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.