Correlation Between Cabana Target and Starboard Investment

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

Diversification Opportunities for Cabana Target and Starboard Investment

0.77

Correlation Coefficient

Cabana Target  Starboard Investment

Poor diversification

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

Pair Corralation between Cabana Target and Starboard Investment

Given the investment horizon of 90 days Cabana Target is expected to generate 1.42 times less return on investment than Starboard Investment. But when comparing it to its historical volatility, Cabana Target Drawdown is 1.57 times less risky than Starboard Investment. It trades about 0.07 of its potential returns per unit of risk. Starboard Investment Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,270  in Starboard Investment Trust on December 3, 2024 and sell it today you would earn a total of  363.00  from holding Starboard Investment Trust or generate 28.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Cabana Target Drawdown  vs.  Starboard Investment Trust

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.

Starboard Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Starboard Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Starboard Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cabana Target and Starboard Investment

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

The idea behind Cabana Target Drawdown and Starboard Investment Trust 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.