Correlation Between Cabana Target and Adaptive Alpha
Can any of the company-specific risk be diversified away by investing in both Cabana Target and Adaptive Alpha 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 Adaptive Alpha 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 Adaptive Alpha Opportunities, you can compare the effects of market volatilities on Cabana Target and Adaptive Alpha 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 Adaptive Alpha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabana Target and Adaptive Alpha.
Diversification Opportunities for Cabana Target and Adaptive Alpha
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cabana and Adaptive is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cabana Target Drawdown and Adaptive Alpha Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adaptive Alpha Oppor 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 Adaptive Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adaptive Alpha Oppor has no effect on the direction of Cabana Target i.e., Cabana Target and Adaptive Alpha go up and down completely randomly.
Pair Corralation between Cabana Target and Adaptive Alpha
Given the investment horizon of 90 days Cabana Target is expected to generate 1.25 times less return on investment than Adaptive Alpha. But when comparing it to its historical volatility, Cabana Target Drawdown is 4.46 times less risky than Adaptive Alpha. It trades about 0.23 of its potential returns per unit of risk. Adaptive Alpha Opportunities is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,754 in Adaptive Alpha Opportunities on November 2, 2024 and sell it today you would earn a total of 48.00 from holding Adaptive Alpha Opportunities or generate 1.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cabana Target Drawdown vs. Adaptive Alpha Opportunities
Performance |
| Timeline |
| Cabana Target Drawdown |
| Adaptive Alpha Oppor |
Cabana Target and Adaptive Alpha Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cabana Target and Adaptive Alpha
The main advantage of trading using opposite Cabana Target and Adaptive Alpha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabana Target position performs unexpectedly, Adaptive Alpha 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 Adaptive Alpha will offset losses from the drop in Adaptive Alpha's long position.The idea behind Cabana Target Drawdown and Adaptive Alpha Opportunities 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.| Adaptive Alpha vs. First Trust Active | Adaptive Alpha vs. Absolute Core Strategy | Adaptive Alpha vs. Pacer Lunt Large | Adaptive Alpha vs. SmartETFs Asia Pacific |
Check out your portfolio center.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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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