Correlation Between Fairlead Tactical and Cabana Target

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

By analyzing existing cross correlation between Fairlead Tactical Sector and Cabana Target Drawdown, you can compare the effects of market volatilities on Fairlead Tactical and Cabana Target 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 Fairlead Tactical with a short position of Cabana Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairlead Tactical and Cabana Target.

Diversification Opportunities for Fairlead Tactical and Cabana Target

0.9

Correlation Coefficient

Fairlead Tactical  Cabana Target

Almost no diversification

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

Pair Corralation between Fairlead Tactical and Cabana Target

Given the investment horizon of 90 days Fairlead Tactical Sector is expected to under-perform the Cabana Target. In addition to that, Fairlead Tactical is 1.04 times more volatile than Cabana Target Drawdown. It trades about -0.06 of its total potential returns per unit of risk. Cabana Target Drawdown is currently generating about -0.02 per unit of volatility. If you would invest  2,555  in Cabana Target Drawdown on December 1, 2024 and sell it today you would lose (19.00) from holding Cabana Target Drawdown or give up 0.74% of portfolio value over 90 days.

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

Fairlead Tactical Sector  vs.  Cabana Target Drawdown

Fairlead Tactical Sector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fairlead Tactical Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Fairlead Tactical is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Cabana Target Drawdown

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cabana Target Drawdown has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cabana Target is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fairlead Tactical and Cabana Target

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

The idea behind Fairlead Tactical Sector and Cabana Target Drawdown 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 Global Correlations module to find global opportunities by holding instruments from different markets.