Correlation Between Herzfeld Caribbean and Power Global

Can any of the company-specific risk be diversified away by investing in both Herzfeld Caribbean and Power Global 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 Power Global 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 Power Global Tactical, you can compare the effects of market volatilities on Herzfeld Caribbean and Power Global 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 Power Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herzfeld Caribbean and Power Global.

Diversification Opportunities for Herzfeld Caribbean and Power Global

0.33

Correlation Coefficient

Herzfeld Caribbean  Power Global

Weak diversification

The 3 months correlation between Herzfeld and Power is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Herzfeld Caribbean Basin and Power Global Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Global Tactical 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 Power Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Global Tactical has no effect on the direction of Herzfeld Caribbean i.e., Herzfeld Caribbean and Power Global go up and down completely randomly.

Pair Corralation between Herzfeld Caribbean and Power Global

Given the investment horizon of 90 days Herzfeld Caribbean Basin is expected to generate 3.27 times more return on investment than Power Global. However, Herzfeld Caribbean is 3.27 times more volatile than Power Global Tactical. It trades about 0.12 of its potential returns per unit of risk. Power Global Tactical is currently generating about 0.07 per unit of risk. If you would invest  207.00  in Herzfeld Caribbean Basin on December 5, 2024 and sell it today you would earn a total of  43.00  from holding Herzfeld Caribbean Basin or generate 20.77% return on investment over 90 days.

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

Herzfeld Caribbean Basin  vs.  Power Global Tactical

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.

Power Global Tactical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power Global Tactical has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Power Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Herzfeld Caribbean and Power Global

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

The idea behind Herzfeld Caribbean Basin and Power Global Tactical 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.