Correlation Between Cabana Target and WBI BullBear
Can any of the company-specific risk be diversified away by investing in both Cabana Target and WBI BullBear 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 WBI BullBear 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 WBI BullBear Quality, you can compare the effects of market volatilities on Cabana Target and WBI BullBear 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 WBI BullBear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cabana Target and WBI BullBear.
Diversification Opportunities for Cabana Target and WBI BullBear
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cabana and WBI is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cabana Target Drawdown and WBI BullBear Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WBI BullBear Quality 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 WBI BullBear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WBI BullBear Quality has no effect on the direction of Cabana Target i.e., Cabana Target and WBI BullBear go up and down completely randomly.
Pair Corralation between Cabana Target and WBI BullBear
Given the investment horizon of 90 days Cabana Target is expected to generate 1.8 times less return on investment than WBI BullBear. But when comparing it to its historical volatility, Cabana Target Drawdown is 2.31 times less risky than WBI BullBear. It trades about 0.43 of its potential returns per unit of risk. WBI BullBear Quality is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 3,507 in WBI BullBear Quality on September 1, 2024 and sell it today you would earn a total of 200.00 from holding WBI BullBear Quality or generate 5.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cabana Target Drawdown vs. WBI BullBear Quality
Performance |
| Timeline |
| Cabana Target Drawdown |
| WBI BullBear Quality |
Cabana Target and WBI BullBear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cabana Target and WBI BullBear
The main advantage of trading using opposite Cabana Target and WBI BullBear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cabana Target position performs unexpectedly, WBI BullBear 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 WBI BullBear will offset losses from the drop in WBI BullBear's long position.The idea behind Cabana Target Drawdown and WBI BullBear Quality 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.| WBI BullBear vs. FT Vest Equity | WBI BullBear vs. Northern Lights | WBI BullBear vs. Dimensional International High | WBI BullBear vs. Matthews China Discovery |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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