Correlation Between Cabana Target and Relative Sentiment

Can any of the company-specific risk be diversified away by investing in both Cabana Target and Relative Sentiment 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 Relative Sentiment 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 Relative Sentiment Tactical, you can compare the effects of market volatilities on Cabana Target and Relative Sentiment 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 Relative Sentiment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabana Target and Relative Sentiment.

Diversification Opportunities for Cabana Target and Relative Sentiment

0.77

Correlation Coefficient

Cabana Target  Relative Sentiment

Poor diversification

The 3 months correlation between Cabana and Relative is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cabana Target Drawdown and Relative Sentiment Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relative Sentiment 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 Relative Sentiment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relative Sentiment has no effect on the direction of Cabana Target i.e., Cabana Target and Relative Sentiment go up and down completely randomly.

Pair Corralation between Cabana Target and Relative Sentiment

Given the investment horizon of 90 days Cabana Target is expected to generate 2.17 times less return on investment than Relative Sentiment. In addition to that, Cabana Target is 1.19 times more volatile than Relative Sentiment Tactical. It trades about 0.05 of its total potential returns per unit of risk. Relative Sentiment Tactical is currently generating about 0.14 per unit of volatility. If you would invest  2,964  in Relative Sentiment Tactical on December 29, 2024 and sell it today you would earn a total of  149.00  from holding Relative Sentiment Tactical or generate 5.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Cabana Target Drawdown  vs.  Relative Sentiment Tactical

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.

Relative Sentiment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Relative Sentiment Tactical are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Relative Sentiment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cabana Target and Relative Sentiment

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

The idea behind Cabana Target Drawdown and Relative Sentiment Tactical 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.