Correlation Between Pabrai Wagons and Cavanal Hill

Can any of the company-specific risk be diversified away by investing in both Pabrai Wagons and Cavanal Hill 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 Pabrai Wagons and Cavanal Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pabrai Wagons Institutional and Cavanal Hill Hedged, you can compare the effects of market volatilities on Pabrai Wagons and Cavanal Hill 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 Pabrai Wagons with a short position of Cavanal Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pabrai Wagons and Cavanal Hill.

Diversification Opportunities for Pabrai Wagons and Cavanal Hill

0.64

Correlation Coefficient

Pabrai Wagons  Cavanal Hill

Poor diversification

The 3 months correlation between Pabrai and Cavanal is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Pabrai Wagons Institutional and Cavanal Hill Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cavanal Hill Hedged and Pabrai Wagons 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 Pabrai Wagons Institutional are associated (or correlated) with Cavanal Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cavanal Hill Hedged has no effect on the direction of Pabrai Wagons i.e., Pabrai Wagons and Cavanal Hill go up and down completely randomly.

Pair Corralation between Pabrai Wagons and Cavanal Hill

Assuming the 90 days horizon Pabrai Wagons Institutional is expected to under-perform the Cavanal Hill. In addition to that, Pabrai Wagons is 1.59 times more volatile than Cavanal Hill Hedged. It trades about -0.29 of its total potential returns per unit of risk. Cavanal Hill Hedged is currently generating about -0.04 per unit of volatility. If you would invest  1,145  in Cavanal Hill Hedged on December 20, 2024 and sell it today you would lose (21.00) from holding Cavanal Hill Hedged or give up 1.83% of portfolio value over 90 days.

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

Pabrai Wagons Institutional  vs.  Cavanal Hill Hedged

Pabrai Wagons Instit

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pabrai Wagons Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Cavanal Hill Hedged

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cavanal Hill Hedged has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Cavanal Hill is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pabrai Wagons and Cavanal Hill

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

The idea behind Pabrai Wagons Institutional and Cavanal Hill Hedged 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.