Correlation Between All American and Brambles

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

By analyzing existing cross correlation between All American Pet and Brambles Ltd ADR, you can compare the effects of market volatilities on All American and Brambles 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 All American with a short position of Brambles. Check out your portfolio center. Please also check ongoing floating volatility patterns of All American and Brambles.

Diversification Opportunities for All American and Brambles

0.51

Correlation Coefficient

All American  Brambles

Very weak diversification

The 3 months correlation between All and Brambles is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding All American Pet and Brambles Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brambles ADR and All American 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 All American Pet are associated (or correlated) with Brambles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brambles ADR has no effect on the direction of All American i.e., All American and Brambles go up and down completely randomly.

Pair Corralation between All American and Brambles

Given the investment horizon of 90 days All American Pet is expected to under-perform the Brambles. In addition to that, All American is 19.43 times more volatile than Brambles Ltd ADR. It trades about -0.24 of its total potential returns per unit of risk. Brambles Ltd ADR is currently generating about 0.01 per unit of volatility. If you would invest  2,408  in Brambles Ltd ADR on October 26, 2024 and sell it today you would earn a total of  3.00  from holding Brambles Ltd ADR or generate 0.12% return on investment over 90 days.

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

All American Pet  vs.  Brambles Ltd ADR

All American Pet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days All American Pet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Brambles ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brambles Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Brambles is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with All American and Brambles

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

The idea behind All American Pet and Brambles Ltd ADR 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 Transaction History module to view history of all your transactions and understand their impact on performance.