Correlation Between Cabana Target and WisdomTree International

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

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

Diversification Opportunities for Cabana Target and WisdomTree International

0.33

Correlation Coefficient

Cabana Target  WisdomTree International

Weak diversification

The 3 months correlation between Cabana and WisdomTree is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Cabana Target Drawdown and WisdomTree International Al in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and Cabana Target 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 Cabana Target Drawdown are associated (or correlated) with WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of Cabana Target i.e., Cabana Target and WisdomTree International go up and down completely randomly.

Pair Corralation between Cabana Target and WisdomTree International

Given the investment horizon of 90 days Cabana Target is expected to generate 5.25 times less return on investment than WisdomTree International. But when comparing it to its historical volatility, Cabana Target Drawdown is 1.15 times less risky than WisdomTree International. It trades about 0.05 of its potential returns per unit of risk. WisdomTree International Al is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,919  in WisdomTree International Al on December 30, 2024 and sell it today you would earn a total of  488.00  from holding WisdomTree International Al or generate 12.45% return on investment over 90 days.

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

Cabana Target Drawdown  vs.  WisdomTree International Al

Cabana Target Drawdown

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cabana Target Drawdown are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

WisdomTree International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International Al are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, WisdomTree International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cabana Target and WisdomTree International

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

The idea behind Cabana Target Drawdown and WisdomTree International Al 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.