Correlation Between Herzfeld Caribbean and Kopernik International

Can any of the company-specific risk be diversified away by investing in both Herzfeld Caribbean and Kopernik International 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 Kopernik International 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 Kopernik International, you can compare the effects of market volatilities on Herzfeld Caribbean and Kopernik International 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 Kopernik International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herzfeld Caribbean and Kopernik International.

Diversification Opportunities for Herzfeld Caribbean and Kopernik International

-0.44

Correlation Coefficient

Herzfeld Caribbean  Kopernik International

Very good diversification

The 3 months correlation between Herzfeld and Kopernik is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Herzfeld Caribbean Basin and Kopernik International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kopernik International 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 Kopernik International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kopernik International has no effect on the direction of Herzfeld Caribbean i.e., Herzfeld Caribbean and Kopernik International go up and down completely randomly.

Pair Corralation between Herzfeld Caribbean and Kopernik International

Given the investment horizon of 90 days Herzfeld Caribbean Basin is expected to generate 1.52 times more return on investment than Kopernik International. However, Herzfeld Caribbean is 1.52 times more volatile than Kopernik International. It trades about 0.15 of its potential returns per unit of risk. Kopernik International is currently generating about -0.07 per unit of risk. If you would invest  224.00  in Herzfeld Caribbean Basin on September 17, 2024 and sell it today you would earn a total of  23.00  from holding Herzfeld Caribbean Basin or generate 10.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Herzfeld Caribbean Basin  vs.  Kopernik International

Herzfeld Caribbean Basin

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Herzfeld Caribbean Basin are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unsteady fundamental drivers, Herzfeld Caribbean may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kopernik International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kopernik International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Kopernik International 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 Kopernik International

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

The idea behind Herzfeld Caribbean Basin and Kopernik International 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.