Correlation Between Adcock Ingram and Brait SE

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

By analyzing existing cross correlation between Adcock Ingram Holdings and Brait SE, you can compare the effects of market volatilities on Adcock Ingram and Brait SE 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 Adcock Ingram with a short position of Brait SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adcock Ingram and Brait SE.

Diversification Opportunities for Adcock Ingram and Brait SE

-0.67

Correlation Coefficient

Adcock Ingram  Brait SE

Excellent diversification

The 3 months correlation between Adcock and Brait is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Adcock Ingram Holdings and Brait SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brait SE and Adcock Ingram 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 Adcock Ingram Holdings are associated (or correlated) with Brait SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brait SE has no effect on the direction of Adcock Ingram i.e., Adcock Ingram and Brait SE go up and down completely randomly.

Pair Corralation between Adcock Ingram and Brait SE

Assuming the 90 days trading horizon Adcock Ingram Holdings is expected to generate 0.59 times more return on investment than Brait SE. However, Adcock Ingram Holdings is 1.7 times less risky than Brait SE. It trades about 0.04 of its potential returns per unit of risk. Brait SE is currently generating about -0.02 per unit of risk. If you would invest  486,322  in Adcock Ingram Holdings on September 26, 2024 and sell it today you would earn a total of  176,978  from holding Adcock Ingram Holdings or generate 36.39% return on investment over 90 days.

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

Adcock Ingram Holdings  vs.  Brait SE

Adcock Ingram Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adcock Ingram Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Adcock Ingram is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Brait SE

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brait SE are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Brait SE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adcock Ingram and Brait SE

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

The idea behind Adcock Ingram Holdings and Brait SE 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.