Correlation Between Applied Digital and Brembo SpA

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

By analyzing existing cross correlation between Applied Digital and Brembo SpA, you can compare the effects of market volatilities on Applied Digital and Brembo SpA 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 Applied Digital with a short position of Brembo SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Digital and Brembo SpA.

Diversification Opportunities for Applied Digital and Brembo SpA

-0.56

Correlation Coefficient

Applied Digital  Brembo SpA

Excellent diversification

The 3 months correlation between Applied and Brembo is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Applied Digital and Brembo SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brembo SpA and Applied Digital 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 Applied Digital are associated (or correlated) with Brembo SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brembo SpA has no effect on the direction of Applied Digital i.e., Applied Digital and Brembo SpA go up and down completely randomly.

Pair Corralation between Applied Digital and Brembo SpA

Given the investment horizon of 90 days Applied Digital is expected to under-perform the Brembo SpA. In addition to that, Applied Digital is 3.02 times more volatile than Brembo SpA. It trades about -0.03 of its total potential returns per unit of risk. Brembo SpA is currently generating about 0.03 per unit of volatility. If you would invest  901.00  in Brembo SpA on December 28, 2024 and sell it today you would earn a total of  21.00  from holding Brembo SpA or generate 2.33% return on investment over 90 days.

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

Applied Digital  vs.  Brembo SpA

Applied Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Brembo SpA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brembo SpA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Brembo SpA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Applied Digital and Brembo SpA

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

The idea behind Applied Digital and Brembo SpA 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.