Correlation Between Advanced Braking and Supply Network

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

Diversification Opportunities for Advanced Braking and Supply Network

0.17

Correlation Coefficient

Advanced Braking  Supply Network

Average diversification

The 3 months correlation between Advanced and Supply is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Braking Technology and Supply Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supply Network 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 Supply Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supply Network has no effect on the direction of Advanced Braking i.e., Advanced Braking and Supply Network go up and down completely randomly.

Pair Corralation between Advanced Braking and Supply Network

Assuming the 90 days trading horizon Advanced Braking is expected to generate 15.7 times less return on investment than Supply Network. In addition to that, Advanced Braking is 1.7 times more volatile than Supply Network. It trades about 0.01 of its total potential returns per unit of risk. Supply Network is currently generating about 0.16 per unit of volatility. If you would invest  3,236  in Supply Network on December 23, 2024 and sell it today you would earn a total of  544.00  from holding Supply Network or generate 16.81% return on investment over 90 days.

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

Advanced Braking Technology  vs.  Supply Network

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.

Supply Network

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Supply Network are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Supply Network unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Braking and Supply Network

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

The idea behind Advanced Braking Technology and Supply Network 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.