Correlation Between Herzfeld Caribbean and Cliffwater Corporate

Can any of the company-specific risk be diversified away by investing in both Herzfeld Caribbean and Cliffwater Corporate 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 Herzfeld Caribbean and Cliffwater Corporate into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Herzfeld Caribbean Basin and Cliffwater Corporate Lending, you can compare the effects of market volatilities on Herzfeld Caribbean and Cliffwater Corporate 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 Herzfeld Caribbean with a short position of Cliffwater Corporate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herzfeld Caribbean and Cliffwater Corporate.

Diversification Opportunities for Herzfeld Caribbean and Cliffwater Corporate

0.8

Correlation Coefficient

Herzfeld Caribbean  Cliffwater Corporate

Very poor diversification

The 3 months correlation between Herzfeld and Cliffwater is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Herzfeld Caribbean Basin and Cliffwater Corporate Lending in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cliffwater Corporate and Herzfeld Caribbean 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 Herzfeld Caribbean Basin are associated (or correlated) with Cliffwater Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cliffwater Corporate has no effect on the direction of Herzfeld Caribbean i.e., Herzfeld Caribbean and Cliffwater Corporate go up and down completely randomly.

Pair Corralation between Herzfeld Caribbean and Cliffwater Corporate

Given the investment horizon of 90 days Herzfeld Caribbean Basin is expected to generate 22.2 times more return on investment than Cliffwater Corporate. However, Herzfeld Caribbean is 22.2 times more volatile than Cliffwater Corporate Lending. It trades about 0.09 of its potential returns per unit of risk. Cliffwater Corporate Lending is currently generating about 0.78 per unit of risk. If you would invest  227.00  in Herzfeld Caribbean Basin on September 21, 2024 and sell it today you would earn a total of  13.00  from holding Herzfeld Caribbean Basin or generate 5.73% return on investment over 90 days.

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

Herzfeld Caribbean Basin  vs.  Cliffwater Corporate Lending

Herzfeld Caribbean Basin

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Herzfeld Caribbean Basin are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong fundamental drivers, Herzfeld Caribbean is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Cliffwater Corporate

Risk-Adjusted Performance

61 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Cliffwater Corporate Lending are ranked lower than 61 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Cliffwater Corporate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Herzfeld Caribbean and Cliffwater Corporate

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

The idea behind Herzfeld Caribbean Basin and Cliffwater Corporate Lending 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.