Correlation Between Cabana Target and First Trust
Can any of the company-specific risk be diversified away by investing in both Cabana Target and First Trust 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 First Trust 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 First Trust Dorsey, you can compare the effects of market volatilities on Cabana Target and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabana Target and First Trust.
Diversification Opportunities for Cabana Target and First Trust
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Cabana and First is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cabana Target Drawdown and First Trust Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dorsey 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Dorsey has no effect on the direction of Cabana Target i.e., Cabana Target and First Trust go up and down completely randomly.
Pair Corralation between Cabana Target and First Trust
Given the investment horizon of 90 days Cabana Target is expected to generate 2.62 times less return on investment than First Trust. But when comparing it to its historical volatility, Cabana Target Drawdown is 3.85 times less risky than First Trust. It trades about 0.14 of its potential returns per unit of risk. First Trust Dorsey is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,355 in First Trust Dorsey on September 1, 2024 and sell it today you would earn a total of 369.00 from holding First Trust Dorsey or generate 15.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Cabana Target Drawdown vs. First Trust Dorsey
Performance |
| Timeline |
| Cabana Target Drawdown |
| First Trust Dorsey |
Cabana Target and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cabana Target and First Trust
The main advantage of trading using opposite Cabana Target and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabana Target position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.The idea behind Cabana Target Drawdown and First Trust Dorsey 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.| First Trust vs. Cambria Global Asset | First Trust vs. Cambria Global Value | First Trust vs. Cambria Foreign Shareholder | First Trust vs. Cambria Value and |
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 CEOs Directory module to screen CEOs from public companies around the world.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |