Correlation Between Rational Special and Cahxx

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

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

Diversification Opportunities for Rational Special and Cahxx

-0.79

Correlation Coefficient

Rational Special  Cahxx

Pay attention - limited upside

The 3 months correlation between Rational and Cahxx is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Rational Special Situations and Cahxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cahxx and Rational Special 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 Special Situations are associated (or correlated) with Cahxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cahxx has no effect on the direction of Rational Special i.e., Rational Special and Cahxx go up and down completely randomly.

Pair Corralation between Rational Special and Cahxx

Assuming the 90 days horizon Rational Special is expected to generate 854.92 times less return on investment than Cahxx. But when comparing it to its historical volatility, Rational Special Situations is 578.57 times less risky than Cahxx. It trades about 0.08 of its potential returns per unit of risk. Cahxx is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  491.00  in Cahxx on September 30, 2024 and sell it today you would lose (391.00) from holding Cahxx or give up 79.63% of portfolio value over 90 days.

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

Rational Special Situations  vs.  Cahxx

Rational Special Sit

Risk-Adjusted Performance

6 of 100

Modest

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

Cahxx

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Rational Special and Cahxx

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

The idea behind Rational Special Situations and Cahxx 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..