Correlation Between Cabana Target and WBI BullBear

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

Diversification Opportunities for Cabana Target and WBI BullBear

0.84

Correlation Coefficient

Cabana Target  WBI BullBear

Very poor diversification

The 3 months correlation between Cabana and WBI is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Cabana Target Drawdown and WBI BullBear Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WBI BullBear Value 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 WBI BullBear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WBI BullBear Value has no effect on the direction of Cabana Target i.e., Cabana Target and WBI BullBear go up and down completely randomly.

Pair Corralation between Cabana Target and WBI BullBear

Given the investment horizon of 90 days Cabana Target Drawdown is expected to generate 1.06 times more return on investment than WBI BullBear. However, Cabana Target is 1.06 times more volatile than WBI BullBear Value. It trades about 0.04 of its potential returns per unit of risk. WBI BullBear Value is currently generating about 0.03 per unit of risk. If you would invest  2,464  in Cabana Target Drawdown on December 27, 2024 and sell it today you would earn a total of  42.00  from holding Cabana Target Drawdown or generate 1.7% return on investment over 90 days.

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

Cabana Target Drawdown  vs.  WBI BullBear Value

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 3 (%) 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.

WBI BullBear Value

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WBI BullBear Value are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, WBI BullBear is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cabana Target and WBI BullBear

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

The idea behind Cabana Target Drawdown and WBI BullBear Value 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.