Correlation Between Brinks and Wex

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

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

Diversification Opportunities for Brinks and Wex

0.45

Correlation Coefficient

Brinks  Wex

Very weak diversification

The 3 months correlation between Brinks and Wex is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Brinks Company and Wex Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wex Inc and Brinks 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 Brinks Company are associated (or correlated) with Wex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wex Inc has no effect on the direction of Brinks i.e., Brinks and Wex go up and down completely randomly.

Pair Corralation between Brinks and Wex

Considering the 90-day investment horizon Brinks Company is expected to generate 0.61 times more return on investment than Wex. However, Brinks Company is 1.64 times less risky than Wex. It trades about -0.04 of its potential returns per unit of risk. Wex Inc is currently generating about -0.05 per unit of risk. If you would invest  9,146  in Brinks Company on December 27, 2024 and sell it today you would lose (436.00) from holding Brinks Company or give up 4.77% of portfolio value over 90 days.

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

Brinks Company  vs.  Wex Inc

Brinks Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brinks Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Brinks is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Wex Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wex Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Brinks and Wex

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

The idea behind Brinks Company and Wex Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.