Correlation Between Herzfeld Caribbean and Wasatch Greater

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

Diversification Opportunities for Herzfeld Caribbean and Wasatch Greater

-0.51

Correlation Coefficient

Herzfeld Caribbean  Wasatch Greater

Excellent diversification

The 3 months correlation between Herzfeld and Wasatch is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Herzfeld Caribbean Basin and Wasatch Greater China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Greater China 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 Wasatch Greater. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Greater China has no effect on the direction of Herzfeld Caribbean i.e., Herzfeld Caribbean and Wasatch Greater go up and down completely randomly.

Pair Corralation between Herzfeld Caribbean and Wasatch Greater

Given the investment horizon of 90 days Herzfeld Caribbean Basin is expected to generate 4.82 times more return on investment than Wasatch Greater. However, Herzfeld Caribbean is 4.82 times more volatile than Wasatch Greater China. It trades about 0.18 of its potential returns per unit of risk. Wasatch Greater China is currently generating about -0.14 per unit of risk. If you would invest  229.00  in Herzfeld Caribbean Basin on December 27, 2024 and sell it today you would earn a total of  38.00  from holding Herzfeld Caribbean Basin or generate 16.59% return on investment over 90 days.

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

Herzfeld Caribbean Basin  vs.  Wasatch Greater China

Herzfeld Caribbean Basin

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Herzfeld Caribbean Basin are ranked lower than 13 (%) 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.

Wasatch Greater China

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wasatch Greater China has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Wasatch Greater 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 Wasatch Greater

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

The idea behind Herzfeld Caribbean Basin and Wasatch Greater China 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.