Correlation Between Cabana Target and FundX Investment

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

Diversification Opportunities for Cabana Target and FundX Investment

0.37

Correlation Coefficient

Cabana Target  FundX Investment

Weak diversification

The 3 months correlation between Cabana and FundX is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Cabana Target Drawdown and FundX Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FundX Investment Trust 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 FundX Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FundX Investment Trust has no effect on the direction of Cabana Target i.e., Cabana Target and FundX Investment go up and down completely randomly.

Pair Corralation between Cabana Target and FundX Investment

Given the investment horizon of 90 days Cabana Target Drawdown is expected to generate 0.8 times more return on investment than FundX Investment. However, Cabana Target Drawdown is 1.25 times less risky than FundX Investment. It trades about 0.06 of its potential returns per unit of risk. FundX Investment Trust is currently generating about -0.09 per unit of risk. If you would invest  2,441  in Cabana Target Drawdown on December 27, 2024 and sell it today you would earn a total of  58.00  from holding Cabana Target Drawdown or generate 2.38% 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.  FundX Investment Trust

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.

FundX Investment Trust

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Cabana Target and FundX Investment

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

The idea behind Cabana Target Drawdown and FundX 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.