Correlation Between Rational Dividend and Cavanal Hill

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

By analyzing existing cross correlation between Rational Dividend Capture and Cavanal Hill Hedged, you can compare the effects of market volatilities on Rational Dividend and Cavanal Hill 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 Rational Dividend with a short position of Cavanal Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Dividend and Cavanal Hill.

Diversification Opportunities for Rational Dividend and Cavanal Hill

0.9

Correlation Coefficient

Rational Dividend  Cavanal Hill

Almost no diversification

The 3 months correlation between Rational and Cavanal is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Rational Dividend Capture and Cavanal Hill Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cavanal Hill Hedged and Rational Dividend 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 Rational Dividend Capture are associated (or correlated) with Cavanal Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cavanal Hill Hedged has no effect on the direction of Rational Dividend i.e., Rational Dividend and Cavanal Hill go up and down completely randomly.

Pair Corralation between Rational Dividend and Cavanal Hill

Assuming the 90 days horizon Rational Dividend Capture is expected to under-perform the Cavanal Hill. But the mutual fund apears to be less risky and, when comparing its historical volatility, Rational Dividend Capture is 1.15 times less risky than Cavanal Hill. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Cavanal Hill Hedged is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,152  in Cavanal Hill Hedged on December 21, 2024 and sell it today you would lose (32.00) from holding Cavanal Hill Hedged or give up 2.78% of portfolio value over 90 days.

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

Rational Dividend Capture  vs.  Cavanal Hill Hedged

Rational Dividend Capture

Risk-Adjusted Performance

Very Weak

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

Cavanal Hill Hedged

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Rational Dividend and Cavanal Hill

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

The idea behind Rational Dividend Capture and Cavanal Hill Hedged 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.