Correlation Between Wabash National and CubicFarm Systems

Can any of the company-specific risk be diversified away by investing in both Wabash National and CubicFarm Systems 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 Wabash National and CubicFarm Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wabash National and CubicFarm Systems Corp, you can compare the effects of market volatilities on Wabash National and CubicFarm Systems 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 Wabash National with a short position of CubicFarm Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wabash National and CubicFarm Systems.

Diversification Opportunities for Wabash National and CubicFarm Systems

-0.61

Correlation Coefficient

Wabash National  CubicFarm Systems

Excellent diversification

The 3 months correlation between Wabash and CubicFarm is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and CubicFarm Systems Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CubicFarm Systems Corp and Wabash National 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 Wabash National are associated (or correlated) with CubicFarm Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CubicFarm Systems Corp has no effect on the direction of Wabash National i.e., Wabash National and CubicFarm Systems go up and down completely randomly.

Pair Corralation between Wabash National and CubicFarm Systems

Considering the 90-day investment horizon Wabash National is expected to under-perform the CubicFarm Systems. But the stock apears to be less risky and, when comparing its historical volatility, Wabash National is 17.85 times less risky than CubicFarm Systems. The stock trades about -0.22 of its potential returns per unit of risk. The CubicFarm Systems Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  5.00  in CubicFarm Systems Corp on December 28, 2024 and sell it today you would earn a total of  14.00  from holding CubicFarm Systems Corp or generate 280.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Wabash National  vs.  CubicFarm Systems Corp

Wabash National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wabash National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

CubicFarm Systems Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CubicFarm Systems Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, CubicFarm Systems reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wabash National and CubicFarm Systems

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

The idea behind Wabash National and CubicFarm Systems Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.