Correlation Between Global Brands and Compeq Manufacturing

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

By analyzing existing cross correlation between Global Brands Manufacture and Compeq Manufacturing Co, you can compare the effects of market volatilities on Global Brands and Compeq Manufacturing 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 Global Brands with a short position of Compeq Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Brands and Compeq Manufacturing.

Diversification Opportunities for Global Brands and Compeq Manufacturing

0.6

Correlation Coefficient

Global Brands  Compeq Manufacturing

Poor diversification

The 3 months correlation between Global and Compeq is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Global Brands Manufacture and Compeq Manufacturing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compeq Manufacturing and Global Brands 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 Global Brands Manufacture are associated (or correlated) with Compeq Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compeq Manufacturing has no effect on the direction of Global Brands i.e., Global Brands and Compeq Manufacturing go up and down completely randomly.

Pair Corralation between Global Brands and Compeq Manufacturing

Assuming the 90 days trading horizon Global Brands Manufacture is expected to under-perform the Compeq Manufacturing. But the stock apears to be less risky and, when comparing its historical volatility, Global Brands Manufacture is 1.58 times less risky than Compeq Manufacturing. The stock trades about -0.12 of its potential returns per unit of risk. The Compeq Manufacturing Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  7,240  in Compeq Manufacturing Co on September 13, 2024 and sell it today you would lose (650.00) from holding Compeq Manufacturing Co or give up 8.98% of portfolio value over 90 days.

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

Global Brands Manufacture  vs.  Compeq Manufacturing Co

Global Brands Manufacture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Brands Manufacture has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Compeq Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compeq Manufacturing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Global Brands and Compeq Manufacturing

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

The idea behind Global Brands Manufacture and Compeq Manufacturing Co 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.