Correlation Between Advanced Braking and Rumble Resources

Can any of the company-specific risk be diversified away by investing in both Advanced Braking and Rumble Resources 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 Rumble Resources 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 Rumble Resources, you can compare the effects of market volatilities on Advanced Braking and Rumble Resources 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 Rumble Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Braking and Rumble Resources.

Diversification Opportunities for Advanced Braking and Rumble Resources

0.43

Correlation Coefficient

Advanced Braking  Rumble Resources

Very weak diversification

The 3 months correlation between Advanced and Rumble is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Braking Technology and Rumble Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rumble Resources 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 Rumble Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rumble Resources has no effect on the direction of Advanced Braking i.e., Advanced Braking and Rumble Resources go up and down completely randomly.

Pair Corralation between Advanced Braking and Rumble Resources

Assuming the 90 days trading horizon Advanced Braking Technology is expected to generate 0.63 times more return on investment than Rumble Resources. However, Advanced Braking Technology is 1.58 times less risky than Rumble Resources. It trades about 0.0 of its potential returns per unit of risk. Rumble Resources is currently generating about -0.04 per unit of risk. If you would invest  8.10  in Advanced Braking Technology on December 28, 2024 and sell it today you would lose (0.20) from holding Advanced Braking Technology or give up 2.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Advanced Braking Technology  vs.  Rumble Resources

Advanced Braking Tec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advanced Braking Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Advanced Braking is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Rumble Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rumble Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Advanced Braking and Rumble Resources

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

The idea behind Advanced Braking Technology and Rumble Resources 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..