Correlation Between Herzfeld Caribbean and Aggressive Investors

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

By analyzing existing cross correlation between Herzfeld Caribbean Basin and Aggressive Investors 1, you can compare the effects of market volatilities on Herzfeld Caribbean and Aggressive Investors 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 Herzfeld Caribbean with a short position of Aggressive Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herzfeld Caribbean and Aggressive Investors.

Diversification Opportunities for Herzfeld Caribbean and Aggressive Investors

0.02

Correlation Coefficient

Herzfeld Caribbean  Aggressive Investors

Significant diversification

The 3 months correlation between Herzfeld and Aggressive is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Herzfeld Caribbean Basin and Aggressive Investors 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Investors and Herzfeld Caribbean 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 Herzfeld Caribbean Basin are associated (or correlated) with Aggressive Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Investors has no effect on the direction of Herzfeld Caribbean i.e., Herzfeld Caribbean and Aggressive Investors go up and down completely randomly.

Pair Corralation between Herzfeld Caribbean and Aggressive Investors

Given the investment horizon of 90 days Herzfeld Caribbean Basin is expected to generate 1.25 times more return on investment than Aggressive Investors. However, Herzfeld Caribbean is 1.25 times more volatile than Aggressive Investors 1. It trades about 0.13 of its potential returns per unit of risk. Aggressive Investors 1 is currently generating about -0.13 per unit of risk. If you would invest  223.00  in Herzfeld Caribbean Basin on December 5, 2024 and sell it today you would earn a total of  27.00  from holding Herzfeld Caribbean Basin or generate 12.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Herzfeld Caribbean Basin  vs.  Aggressive Investors 1

Herzfeld Caribbean Basin

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herzfeld Caribbean Basin are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unsteady fundamental drivers, Herzfeld Caribbean sustained solid returns over the last few months and may actually be approaching a breakup point.

Aggressive Investors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aggressive Investors 1 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Herzfeld Caribbean and Aggressive Investors

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

The idea behind Herzfeld Caribbean Basin and Aggressive Investors 1 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 Anywhere module to track or share privately all of your investments from the convenience of any device.