Correlation Between Brinker Capital and Cajxx

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

By analyzing existing cross correlation between Brinker Capital Destinations and Cajxx, you can compare the effects of market volatilities on Brinker Capital and Cajxx 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 Brinker Capital with a short position of Cajxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brinker Capital and Cajxx.

Diversification Opportunities for Brinker Capital and Cajxx

-0.61

Correlation Coefficient

Brinker Capital  Cajxx

Excellent diversification

The 3 months correlation between Brinker and Cajxx is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Brinker Capital Destinations and Cajxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cajxx and Brinker Capital 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 Brinker Capital Destinations are associated (or correlated) with Cajxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cajxx has no effect on the direction of Brinker Capital i.e., Brinker Capital and Cajxx go up and down completely randomly.

Pair Corralation between Brinker Capital and Cajxx

Assuming the 90 days horizon Brinker Capital is expected to generate 147.0 times less return on investment than Cajxx. But when comparing it to its historical volatility, Brinker Capital Destinations is 112.13 times less risky than Cajxx. It trades about 0.09 of its potential returns per unit of risk. Cajxx is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  492.00  in Cajxx on September 29, 2024 and sell it today you would lose (392.00) from holding Cajxx or give up 79.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Brinker Capital Destinations  vs.  Cajxx

Brinker Capital Dest

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brinker Capital Destinations are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Brinker Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cajxx

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cajxx are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Cajxx showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brinker Capital and Cajxx

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

The idea behind Brinker Capital Destinations and Cajxx 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.