Correlation Between STF Tactical and Cabana Target

Can any of the company-specific risk be diversified away by investing in both STF Tactical and Cabana Target 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 STF Tactical and Cabana Target into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between STF Tactical Growth and Cabana Target Leading, you can compare the effects of market volatilities on STF Tactical and Cabana Target 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 STF Tactical with a short position of Cabana Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of STF Tactical and Cabana Target.

Diversification Opportunities for STF Tactical and Cabana Target

0.91

Correlation Coefficient

STF Tactical  Cabana Target

Almost no diversification

The 3 months correlation between STF and Cabana is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding STF Tactical Growth and Cabana Target Leading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabana Target Leading and STF Tactical 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 STF Tactical Growth are associated (or correlated) with Cabana Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabana Target Leading has no effect on the direction of STF Tactical i.e., STF Tactical and Cabana Target go up and down completely randomly.

Pair Corralation between STF Tactical and Cabana Target

Considering the 90-day investment horizon STF Tactical Growth is expected to generate 1.55 times more return on investment than Cabana Target. However, STF Tactical is 1.55 times more volatile than Cabana Target Leading. It trades about 0.09 of its potential returns per unit of risk. Cabana Target Leading is currently generating about 0.05 per unit of risk. If you would invest  3,272  in STF Tactical Growth on August 30, 2024 and sell it today you would earn a total of  188.00  from holding STF Tactical Growth or generate 5.75% return on investment over 90 days.

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

STF Tactical Growth  vs.  Cabana Target Leading

STF Tactical Growth

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in STF Tactical Growth are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, STF Tactical is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Cabana Target Leading

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cabana Target Leading are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cabana Target is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with STF Tactical and Cabana Target

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

The idea behind STF Tactical Growth and Cabana Target Leading 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.