Correlation Between Broadridge Financial and Ametek

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

By analyzing existing cross correlation between Broadridge Financial Solutions and Ametek Inc, you can compare the effects of market volatilities on Broadridge Financial and Ametek 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 Broadridge Financial with a short position of Ametek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadridge Financial and Ametek.

Diversification Opportunities for Broadridge Financial and Ametek

0.81

Correlation Coefficient

Broadridge Financial  Ametek

Very poor diversification

The 3 months correlation between Broadridge and Ametek is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Broadridge Financial Solutions and Ametek Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ametek Inc and Broadridge Financial 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 Broadridge Financial Solutions are associated (or correlated) with Ametek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ametek Inc has no effect on the direction of Broadridge Financial i.e., Broadridge Financial and Ametek go up and down completely randomly.

Pair Corralation between Broadridge Financial and Ametek

Assuming the 90 days trading horizon Broadridge Financial Solutions is expected to generate 1.35 times more return on investment than Ametek. However, Broadridge Financial is 1.35 times more volatile than Ametek Inc. It trades about -0.09 of its potential returns per unit of risk. Ametek Inc is currently generating about -0.43 per unit of risk. If you would invest  22,858  in Broadridge Financial Solutions on September 23, 2024 and sell it today you would lose (438.00) from holding Broadridge Financial Solutions or give up 1.92% of portfolio value over 90 days.

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

Broadridge Financial Solutions  vs.  Ametek Inc

Broadridge Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Broadridge Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ametek Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ametek Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ametek may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Broadridge Financial and Ametek

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

The idea behind Broadridge Financial Solutions and Ametek Inc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.