Correlation Between Power Floating and Herzfeld Caribbean

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

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

Diversification Opportunities for Power Floating and Herzfeld Caribbean

0.82

Correlation Coefficient

Power Floating  Herzfeld Caribbean

Very poor diversification

The 3 months correlation between Power and Herzfeld is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Power Floating Rate and Herzfeld Caribbean Basin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herzfeld Caribbean Basin and Power Floating 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 Power Floating Rate are associated (or correlated) with Herzfeld Caribbean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herzfeld Caribbean Basin has no effect on the direction of Power Floating i.e., Power Floating and Herzfeld Caribbean go up and down completely randomly.

Pair Corralation between Power Floating and Herzfeld Caribbean

Assuming the 90 days horizon Power Floating is expected to generate 3.96 times less return on investment than Herzfeld Caribbean. But when comparing it to its historical volatility, Power Floating Rate is 11.81 times less risky than Herzfeld Caribbean. It trades about 0.64 of its potential returns per unit of risk. Herzfeld Caribbean Basin is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  242.00  in Herzfeld Caribbean Basin on September 18, 2024 and sell it today you would earn a total of  6.00  from holding Herzfeld Caribbean Basin or generate 2.48% return on investment over 90 days.

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

Power Floating Rate  vs.  Herzfeld Caribbean Basin

Power Floating Rate

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Power Floating Rate are ranked lower than 31 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Power Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Herzfeld Caribbean Basin

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Herzfeld Caribbean Basin are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unsteady fundamental drivers, Herzfeld Caribbean may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Power Floating and Herzfeld Caribbean

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

The idea behind Power Floating Rate and Herzfeld Caribbean Basin 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.