Correlation Between Advanced Braking and Regal Funds

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

By analyzing existing cross correlation between Advanced Braking Technology and Regal Funds Management, you can compare the effects of market volatilities on Advanced Braking and Regal Funds 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 Advanced Braking with a short position of Regal Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Braking and Regal Funds.

Diversification Opportunities for Advanced Braking and Regal Funds

0.7

Correlation Coefficient

Advanced Braking  Regal Funds

Poor diversification

The 3 months correlation between Advanced and Regal is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Braking Technology and Regal Funds Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regal Funds Management and Advanced Braking 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 Advanced Braking Technology are associated (or correlated) with Regal Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regal Funds Management has no effect on the direction of Advanced Braking i.e., Advanced Braking and Regal Funds go up and down completely randomly.

Pair Corralation between Advanced Braking and Regal Funds

Assuming the 90 days trading horizon Advanced Braking Technology is expected to generate 1.19 times more return on investment than Regal Funds. However, Advanced Braking is 1.19 times more volatile than Regal Funds Management. It trades about 0.13 of its potential returns per unit of risk. Regal Funds Management is currently generating about 0.1 per unit of risk. If you would invest  7.20  in Advanced Braking Technology on September 10, 2024 and sell it today you would earn a total of  1.50  from holding Advanced Braking Technology or generate 20.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

Advanced Braking Technology  vs.  Regal Funds Management

Advanced Braking Tec

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Braking Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Advanced Braking unveiled solid returns over the last few months and may actually be approaching a breakup point.

Regal Funds Management

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regal Funds Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Regal Funds unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Braking and Regal Funds

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

The idea behind Advanced Braking Technology and Regal Funds Management 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.