Correlation Between Wasatch Greater and Herzfeld Caribbean

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

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

Diversification Opportunities for Wasatch Greater and Herzfeld Caribbean

0.17

Correlation Coefficient

Wasatch Greater  Herzfeld Caribbean

Average diversification

The 3 months correlation between Wasatch and Herzfeld is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Greater China and Herzfeld Caribbean Basin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herzfeld Caribbean Basin and Wasatch Greater 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 Wasatch Greater China are associated (or correlated) with Herzfeld Caribbean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herzfeld Caribbean Basin has no effect on the direction of Wasatch Greater i.e., Wasatch Greater and Herzfeld Caribbean go up and down completely randomly.

Pair Corralation between Wasatch Greater and Herzfeld Caribbean

Assuming the 90 days horizon Wasatch Greater China is expected to generate 2.17 times more return on investment than Herzfeld Caribbean. However, Wasatch Greater is 2.17 times more volatile than Herzfeld Caribbean Basin. It trades about 0.12 of its potential returns per unit of risk. Herzfeld Caribbean Basin is currently generating about 0.15 per unit of risk. If you would invest  405.00  in Wasatch Greater China on September 17, 2024 and sell it today you would earn a total of  70.00  from holding Wasatch Greater China or generate 17.28% return on investment over 90 days.

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

Wasatch Greater China  vs.  Herzfeld Caribbean Basin

Wasatch Greater China

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Greater China are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Wasatch Greater showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Wasatch Greater and Herzfeld Caribbean

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

The idea behind Wasatch Greater China and Herzfeld Caribbean Basin 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..