Correlation Between Kopernik International and Herzfeld Caribbean

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

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

Diversification Opportunities for Kopernik International and Herzfeld Caribbean

-0.44

Correlation Coefficient

Kopernik International  Herzfeld Caribbean

Very good diversification

The 3 months correlation between Kopernik and Herzfeld is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Kopernik International Fund 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 Kopernik International 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 Kopernik International Fund 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 Kopernik International i.e., Kopernik International and Herzfeld Caribbean go up and down completely randomly.

Pair Corralation between Kopernik International and Herzfeld Caribbean

Assuming the 90 days horizon Kopernik International Fund is expected to under-perform the Herzfeld Caribbean. But the mutual fund apears to be less risky and, when comparing its historical volatility, Kopernik International Fund is 1.26 times less risky than Herzfeld Caribbean. The mutual fund trades about -0.24 of its potential returns per unit of risk. The Herzfeld Caribbean Basin is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  242.00  in Herzfeld Caribbean Basin on September 17, 2024 and sell it today you would earn a total of  5.00  from holding Herzfeld Caribbean Basin or generate 2.07% return on investment over 90 days.

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

Kopernik International Fund  vs.  Herzfeld Caribbean Basin

Kopernik International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kopernik International Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Kopernik International 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

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Herzfeld Caribbean Basin are ranked lower than 11 (%) 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 Kopernik International and Herzfeld Caribbean

The main advantage of trading using opposite Kopernik International and Herzfeld Caribbean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kopernik International 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 Kopernik International Fund 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.

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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.